Mubasher: The Organization of the Petroleum Exporting Countries (OPEC) on Friday cut its outlook for global oil demand for the rest of the year, citing sluggish economic growth and rising supplies from rivals, a move that should justify maintaining the supply cuts in place.
Global oil consumption is now set to grow by 1.10 million barrels per day (bpd), 40,000 bpd lower than the prior forecast, OPEC’s research arm said in its monthly oil market report (OMR).
The 14-member group indicated that the market would be in a slight surplus in 2020.
A slowdown in the world’s major economies, an ongoing trade conflict between the US and China, and Brexit uncertainty would build the case for OPEC and its allies, including Russia, to keep in place the supply-cutting pact to shore up prices.
“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 the report.
A Saudi official has already suggested further steps to keep the market on an even keel, according to Reuters.
However, the producer club maintained its projection for 2020 oil demand growth at 1.14 million bpd, up slightly from this year, but still highlighted downside risks facing the global economy.
“Especially trade-related developments will need to be thoroughly reviewed in the coming weeks with some likelihood of a further downward revision in September,” OPEC said.
Global growth outlook was slashed to 3.1%, a little down from 3.2%, while growth forecast for the next year was kept at 3.2%.
On a side note, crude inventories in developed economies saw a build-up last June, indicating a trend that could raise worries over a potential oil surplus.
Stockpiles during the month came way above the five-year average by 67 million bpd, despite supply cuts led by the producer group and partners, an alliance known as OPEC+, as well as involuntary shortages of barrels from Iran and Venezuela, both of which under the US sanctions.
By 2:25 pm GMT, US Nymex crude futures dropped by 0.62% to $58.59 per barrel (pb), while global benchmark Brent futures rose by 0.35% to $54.66 pb.