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OECD SUPPLY ‘TO EDGE UP’

Opec maintains oil demand growth forecast for 2019

VIENNA, August 19, 2019

The global oil demand growth forecast for 2019 remains at 1.14 million barrels per day (mb/d), with expectations for global oil demand to reach 99.87 mb/d, said Opec in its July monthly outlook for the oil market.

In 2020, the initial forecast indicates growth of around 1.14 mb/d year-on-year (y-o-y), as global oil demand is anticipated to surpass the 100 mb/d threshold on an annual basis, to average 101.01 mb/d for the year, the outlook from the Organization of Petroleum Exporting Countries (Opec) said.

The OECD is forecast to register growth of 0.09 mb/d with the bulk of growth coming from OECD Americas. The non-OECD region is expected to continue leading oil demand growth in 2020 with initial projections indicating an increase of around 1.05 mb/d, most of which is attributed to Other Asia and China, with a combined oil demand growth of 0.68 mb/d.

World oil supply

The non-Opec oil supply growth forecast for 2019 has been revised down by 95,000 b/d to reach 2.05 mb/d y-o-y, standing at 64.43 mb/d.

The  downward  revisions  are mainly  due  to  the  extension  of  the  voluntary  production adjustments by participating oil producing countries of the Declaration of Cooperation, as well as downward  revisions  for  Brazil and Norway  in  2Q19.

In  2020,  non-Opec  oil  supply  is  projected  to  grow  by 2.4 mb/d,  averaging 66.87 mb/d.  The  US,  Brazil,  Norway  and Canada  are  forecast  to  be  the  main  growth  drivers,  while  Mexico,  Colombia,  the  UK,  Indonesia  and  Thailand  are  expected  to  see  the  largest  declines.

Opec  NGL  production  is  expected  to  grow  by  0.07 mb/d in  2019  to  average  4.84 mb/d, and is  forecast  to  increase  by  0.03 mb/d in  2020  to  average 4.87 mb/d.  In June, Opec crude oil production decreased by 68 tb/d to average 29.83 mb/d, according to secondary sources.

World oil demand in 2020

World  oil  demand  in  2020 is  forecast  to  grow  by  1.14   mb/d   y-o-y, in   line   with   the   current   year   estimates, Opec said in the outlook.

The OECD is forecast to grow by  0.09  mb/d  next  year,  with  only  OECD  Americas  showing positive  growth,  while OECD  Europe  and  Asia Pacific are anticipated to continue to decline. In the  non-OECD,  oil  demand  is  expected  to  increase  by  around  1.05  mb/d.

The transportation sector   is   anticipated   to   lead   growth   on   strong   demand for motor and aviation fuels.  Demand  from  the petrochemical sector will remain strong, although it  will  ease  slightly  in  the  US  due  to  lower  ethane  cracking capacity additions.

Factors that could  influence  the  pace  of  oil  demand  growth  in  2020  include  macroeconomic  developments  in  major  consuming  countries,  the  displacements  of  heavy  distillates with  natural  gas  and  other  fuels,  subsidy  programmes and plans for their removal, the effect of commissioning/delays/closures of mega projects in the downstream and fuel efficiency programmes, especially in the transportation sector.

Non-Opec  oil  supply  is  forecast  to  grow  by  2.4  mb/d  in  2020,  higher  than  in  the  current  year.  This is mainly due to the debottlenecking of oil infrastructure in North America and new project ramp ups in Brazil, Norway and Australia. In contrast, natural decline in Mexico, Indonesia, Colombia and Egypt is foreseen to offset some of this growth.

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. More than 2.5 mb/d of new pipeline capacity  in  the  Permian  is  expected  to  become  operational  by  July  2020.

Investment  by  exploration  and  production  (E&P)  companies  in  the  US  is  expected  to  reach  around  $180  billion  next  year,  with  the  tight  oil  sector forecast to spend some $124 billion.

Meanwhile, non-Opec supply growth is expected to be supported by  startups  of  a  number  of  fields  in  2020,  including  Norway's  Johan  Sverdrup  as  well  as  assets  in  Lula,  Lapa,  Laraand  the  Buzios  fields  in  Brazil.  However,  factors  such  as  the  drive  for  capex  discipline,  geopolitical  tensions,  unplanned  outages,  extended  field  maintenance,  delays  in  infrastructure  de-bottlenecking, as well as oil price developments will remain the key uncertainties affecting supply growth.

Based  on  the  above  forecasts,  the  demand  for  Opec  crude  is  expected  to  average  29.3 mb/d  in  2020,  down  by  around  1.3  mb/d  from  2019.  In  light  of  the  uncertainties  affecting  the  global  oil  market  and  in  an  effort  to  avoid  a  destabilising  build-up  in  oil  inventories,  Opec  and  non-Opec  countries  participating  in  the  Declaration  of  Cooperation  agreed  to  extend  voluntary  production  adjustments  until  31  March  2020,  reaffirming their continued commitment to promote and enhance oil market stability. – TradeArabia News Service




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