OPEC on Friday provided a downbeat oil-market outlook for the rest of 2019 as economic growth slows and highlighted challenges in 2020 as rivals pump more, building a case to keep up an OPEC-led pact to restrain supplies.
In a monthly report, the Organization of the Petroleum Exporting Countries cut its forecast for oil demand growth in 2019 by 40,000 barrels per day (bpd) and indicated the market will be in slight surplus in 2020.
The bearish outlook due to slowing economies amid the US-China trade dispute and Brexit could press the case for OPEC and allies including Russia to maintain a policy of cutting output to boost prices. Already, a Saudi official has hinted at further steps to support the market.
“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.
OPEC's policy to support prices through supply cuts has been giving a sustained boost to US shale and other rival supply, and the report suggests the world will need less OPEC crude next year.
The demand for OPEC crude will average 29.41 million bpd next year, OPEC said, down 1.3 million bpd from this year. Still, the 2020 forecast was raised 140,000 bpd from last month's forecast.
In July, OPEC and its allies renewed a supply-cutting pact until March 2020, citing the need to avoid a build-up of inventories that could hit prices.
OPEC said its oil output in July fell by 246,000 bpd to 29.61 million bpd as Saudi Arabia cut supply more than the pact requires. Even so, OPEC output is still above the 2020 demand forecast.
The report suggests there will be a 2020 supply surplus of 200,000 bpd if OPEC keeps pumping at July's rate and other things remain equal.
OPEC sees bearish oil outlook for rest of 2019, points to 2020 surplus