World Markets

OPEC cuts 2020 oil demand forecast, urges effort to avert new glut

Credit: REUTERS/Leonhard Foeger

OPEC on Wednesday cut its forecast for growth in world oil demand in 2020 due to an economic slowdown, an outlook the producer group said highlighted the need for ongoing efforts to prevent a new glut of crude.

By Alex Lawler

LONDON, Sept 11 (Reuters) - OPEC on Wednesday cut its forecast for growth in world oil demand in 2020 due to an economic slowdown, an outlook the producer group said highlighted the need for ongoing efforts to prevent a new glut of crude.

In a monthly report, the Organization of the Petroleum Exporting Countries cut its forecast for global oil demand growth next year by 60,000 barrels per day (bpd) to 1.08 million bpd and indicated the market would be in surplus.

The weaker outlook amid a U.S.-China trade dispute and Brexit could press the case for the Organization of the Petroleum Exporting Countries and allies including Russia to maintain or adjust their policy of cutting output.

Iraq said ministers would on Thursday discuss whether there was a need for deeper cuts.

OPEC, in the report, lowered its forecast for world economic growth in 2020 to 3.1% from 3.2% and said next year's increase in oil demand would be outpaced by "strong growth" in supply from rival producers such as the United States.

"This highlights the shared responsibility of all producing countries to support oil market stability to avoid unwanted volatility and a potential relapse into market imbalance," the report said.

OPEC's policy of supporting prices through supply cuts has given a sustained boost to U.S. 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 29.40 million bpd next year, OPEC said, down 1.2 million bpd from this year.

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.

Even so, OPEC said its oil output in August rose by 136,000 bpd to 29.74 million bpd as Saudi Arabia, Iraq and Nigeria boosted supply.

Producers are still over-complying with the supply-cutting deal, but this puts OPEC output further above the 2020 demand forecast.

The report suggests there will be a 2020 supply surplus of 340,000 bpd if OPEC keeps pumping at August's rate and other things remain equal, more than the surplus forecast in last month's report.

Oil surplus or deficithttps://tmsnrt.rs/2Rf9w2p

(Editing by Dale Hudson)

((alex.lawler@thomsonreuters.com; +44 207 542 4087; Reuters Messaging: alex.lawler.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

US Markets

Latest World Markets Videos

    China Tension Won't Derail Equity Markets, State Street Says

    The escalating tension between the U.S. and China is unlikely to derail the equity markets, according to State Street's Benjamin Jones. "The risk-on, risk-off story is still very much dominated by Covid," he said on Bloomberg.

    Jul 24, 2020

    Reuters

    Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

    Learn More