LONDON: OPEC on Thursday forecast world demand for its crude will decline next year as rivals pump more, pointing to the return of a surplus despite an OPEC-led pact to restrain supplies.
Giving its first 2020 forecasts in a monthly report, the Organization of the Petroleum Exporting Countries said the world would need 29.27 million barrels per day (bpd) of crude from its 14 members next year, down 1.34 million bpd from this year.
The drop in demand for OPEC crude highlights the sustained boost that OPEC’s policy to support prices by supply cuts is giving to US shale and other rival supply. This potentially gives US President Donald Trump more room to keep up sanctions on OPEC members Iran and Venezuela.
“US tight crude production is anticipated to continue to grow as new pipelines will allow more Permian crude to flow to the US Gulf Coast export hub,” OPEC said, using another term for shale oil.
OPEC in the report also forecast that world oil demand would rise at the same pace as this year and that the world economy would expand at this year’s pace, despite slower growth in the United States and China.
“The 2020 forecast assumes that no further downside risks materialize, particularly that trade-related issues do not escalate further,” OPEC said of the economic outlook.
“Brexit poses an additional risk, as does a continuation in the current slowdown in manufacturing activity.”
OPEC and its allies last week renewed a supply-cutting pact until March 2020, citing the need to avoid a build-up of inventories that could hit prices.
OPEC also said its oil output in June fell by 68,000 bpd to 29.83 million bpd, above the 2020 demand forecast.
This suggests there will be a 2020 supply surplus of over 500,000 bpd if OPEC keeps pumping at June’s rate and other things remain equal.
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