OPEC on Wednesday further trimmed its forecast for 2019 global oil-demand growth and said the risk to the economic outlook was skewed to the downside, adding a new challenge to the group’s efforts to support the market next year.
In a monthly report, the Organization of the Petroleum Exporting Countries said world oil demand next year would rise by 1.41 million barrels a day, 20,000 barrels less than last month and the second consecutive reduction in the forecast.
The report provides further indication the rapid oil demand growth that helped OPEC and allies get rid of a supply glut will moderate in 2019. This means there will be less strain on other producers in making up for supply losses from Venezuela and Iran as renewed U.S. sanctions kick in.
“Rising challenges in some emerging and developing economies are skewing the current global economic growth risk forecast to the downside,” OPEC’s report said. “Rising trade tensions, and the consequences of further potential monetary tightening by G4 central banks, in combination with rising global debt levels, are additional concerns.”
Crude edged lower after the OPEC report was released, trading just above US$79 a barrel. Prices have slipped since topping US$80 this year for the first time since 2014 on expectations of more supply and weaker demand.
OPEC and a group of non-OPEC countries agreed in June to return to 100-per-cent compliance with oil output cuts that began in January, 2017, after months of underproduction by Venezuela and others pushed adherence above 160 per cent.
In the report, OPEC said its oil output rose in August by 278,000 barrels a day to 32.56 million barrels, following the June deal. The biggest rise came from Libya, which is exempt from the agreement. This helped offset declines in Venezuela and Iran.
This means compliance with the original supply-cutting deal has increased to 133 per cent, according to a Reuters calculation, meaning members are still cutting more than promised. The original figure for July was 126 per cent.
The August production rate is lower than the average demand for OPEC crude in 2018 and considerably more than will be needed next year as rivals such as the United States expand supplies.
OPEC said the world will need 32.05 million barrels a day from its 15 members in 2019, unchanged from last month. This suggests there will be a 500,000-barrel-a-day surplus in the market should OPEC keep pumping the same amount and other things remain equal.
The higher prices that have followed the OPEC-led deal are still prompting more growth in rival supply. OPEC said it expects non-OPEC production to expand by 2.15 million barrels a day next year, 20,000 more than forecast last month.