An improving outlook for the global economy will feed through into accelerated oil demand growth in 2020, the Organization of the Petroleum Exporting Countries said Wednesday.
In its closely scrutinized monthly oil market report, OPEC increased its 2020 world oil demand growth forecast by 140,000 barrels to 1.22 million barrels a day, while also nudging its global economic growth forecast to 3.1% for the year ahead.
The cartel’s boost to its oil demand growth figure “mainly reflect[s] an improved economic outlook for 2020,” the report said, with the developing world–especially China and India–expected to be responsible for most of that growth.
The report comes a month after OPEC and its allies completed a new production pact to deepen their oil-output cuts of 500,000 barrels a day to last through the end of March, bringing the coalition’s reduction to roughly 1.7 million barrels a day.
Those deeper cuts were aimed at mitigating the effects of the slowing global growth that had a knock-on effect on oil demand last year. In that context, OPEC cut its 2019 estimated world oil demand for the fifth time in eight months, this time by a further 50,000 barrels to 930,000 barrels a day.
Still, those hoping for a tighter oil supply-demand balance may yet be disappointed. The cartel raised its non-OPEC supply growth forecast for 2020 by 180,000 barrels a day to 2.35 million barrels, citing upward revisions to supply in Norway, Mexico, and Guyana.
Despite downward revisions to supply growth in the U.S., OPEC said it expects the country–along with other non-OPEC giants like Canada, Brazil, Norway and Guyana–to lead global supply growth this year.
The additional cuts OPEC and its allies agreed on in December may fail to arrest the growth of a burgeoning global oil glut based on that month’s cartel production figures.
Production data based on secondary sources and cited in the OPEC report showed that cartel production fell by 161,000 barrels a day in December, with Saudi Arabia cutting 111,000 barrels and Iraq–OPEC’s second largest producer–cutting 76,000.
Those figures contrasted with OPEC’s official production data, though, which come with no headline cartel production number. Those data showed a drop in Saudi production of 296,000 barrels a day, while Iraqi and Nigerian production declined 60,000 and 95,000 barrels respectively.
During the course of 2019, Iraq and Nigeria repeatedly flouted their agreed production cuts and were held up as examples of under-compliance by Saudi Arabia–OPEC’s de facto leader.
Production in Angola–whose delegates stormed out of last month’s fractious cartel meeting in Vienna–rose by 96,000 barrels a day in December.
The report gave no official figures for Iranian production in December, and referred euphemistically to broader geopolitical “tensions” and “uncertainties” at the end of December as affecting oil markets.
No explicit reference was made to the tensions between the U.S., Iran, and Iraq, which flared up at the start of January after a U.S. air strike killed high-ranking Iranian military leader Qassem Soleimani and stoked traders’ fears of retaliatory attacks on Middle Eastern energy infrastructure. Those tensions have since calmed though.
The price of Brent crude, the global benchmark, has fallen 2.2% so far in January and U.S. crude futures have slipped 2.9%, after swinging wildly in the first week of the month.