OPEC cuts non-OPEC crude supply growth forecasts for 2019, 2020

LONDON (ICIS)–OPEC has revised down its non-OPEC crude oil supply growth estimates for 2019 and 2020 on the back of lower-than-expected output in the US, Brazil, Norway, and Thailand, the cartel said on Friday.

Non-OPEC supply growth expectations fell 72,000 bbl/day for 2019 and 50,000 bbl/day since the group’s last monthly oil report, while OPEC production last month fell 246,000 bbl/day as the global economy continued its decline.

Despite weaker-than-expected US output, the country’s total supply growth for the year is expected to stand at 1.87m bbl/day, representing the bulk of all non-OPEC output hikes.

Demand expectations for this year have also fallen, due to weaker consumption in the Americas, while 2020 estimates remained unchanged at 101.05m bbl/day although strong downside risks remain due to the continual weakening in global growth forecasts.

OPEC may be considering further production cutbacks on top of its existing curtailment programme, according to analysts who expect an additional 1m bbl/day of oil needs to be removed from the system to balance the market. The cartel said that willingness to intervene remains crucial.

“While the outlook for market fundamentals seems somewhat bearish for the rest of the year, given softening economic growth, ongoing global trade issues and slowing oil demand growth, it remains critical to closely monitor the supply/demand balance and assist market stability in the months ahead,” OPEC said in its latest oil market report.

It is increasingly important to Saudi Arabia to boost oil pricing, as it gradually moves forward with plans to take Aramco, the state’s oil and gas company and engine of its economy, public.

The company has already opened up to additional scrutiny through the publication of its first ever financial results statement this week.

The most significant drops in OPEC production in July were from Saudi Arabia, which cut output by 134,000 bbl/day month on month.

Iran, which is suffering under the US trade embargo and Venezuela, which GDP is expected to contract 35% this year, made up some of the other largest falls, at 47,000 bbl/day and 32,000 bbl/day respectively.

Venezuela’s total oil production was estimated at 742,000 bbl/day in July, when output was more than four times that level a few years earlier.

Unplanned outages, supply shortages and geopolitical tensions among oil-producing countries helped to support prices through much of the first half of the year despite bearish demand growth, but this trend reversed as macroeconomic concerns intensified and hopes for a late-2019 recovery dissipated.

Supply levels remain stubbornly above the latest five-year average, with the latest salvos in the US-China trade war at the start of August pushing prices back down to levels not seen since the beginning of the year.

The US has pushed back its latest tariff hike plans to mid-December to avoid a rise in consumer goods prices in the run-up to Christmas, but China this week promised retaliatory measures despite the postponement.

Despite the support added by Middle Eastern tensions and supply outages, demand fell in January-May to the lowest levels over that period since 2008, according to estimates from the International Energy Agency (IEA) last week.

Pictured: A crude oil pumpjack in Alberta, Canada
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