KHALEEJ TIMES, Thursday, Sep 12, 2019 | Muharram 13, 1441
Opec cuts oil demand growth forecast
Opec on Wednesday cut its forecast for world oil demand growth in 2020 on
the backdrop a global slowdown, setting the stage for a possible decision today
by the group and its allies on further output reduction or on keeping the
Opec, Russia and other producers, which had implemented a crucial deal to cut
output by 1.2 million bpd until March 2020 in a bid to avert a glut, are meeting
today in Abu Dhabi to review the market trends and ponder on more cuts if needed
to prop up prices.
In a monthly report, the oil exporters group said oil demand worldwide would
expand by 1.08 million barrels per day, 60,000 bpd less than previously
estimated, and indicated the market would be in surplus.
According to a revised forecast, demand for Opec crude will average 29.40
million bpd in 2020, down 1.2 million bpd from this year.
The group also revised down its forecast for world economic growth in 2020 to
3.1 per cent from 3.2 per cent.
Analysts said the weaker outlook amid a US-China trade war and Brexit could
press the case for Opec and its allies to maintain or adjust their policy of
The group also expects non-Opec production to rise by nearly two mbd this year
and 2.25 mbd next year, largely due to gains in 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," Opec report said.
Oil prices pared an earlier gain after the report was released to sit just below
$63 a barrel. Despite the Opec-led cut, oil has tumbled from April's 2019 peak
above $75, pressured by trade concerns and an economic slowdown. Oil prices have
risen more than seven per cent this month, supported by declines in global
inventories and signs of an easing in trade tensions.
Mihir Kapadia, the CEO of Sun Global Investments, said oil prices have been
rising as optimism surrounding production cuts continues to grow.
"Prince Abdulaziz's (new Saudi energy minister) recent comments that Opec would
not change its current policy of cutting oil production by 1.2 million barrels
per day, has been taken as a proactive move by Saudi Arabia and Opec. It has
given traders some much needed confidence as the trade dispute and slowing
global economy continue to weigh heavily on the markets. However, there will
need to be concrete progress between now and the next few weeks if markets are
to have a positive outlook going for 2020," said Kapadia.