London — OPEC’s recent decision with Russia and other allies to boost crude output by a combined 1 million b/d may be insufficient to meet global demand in the months ahead, according to the producer group’s own forecast.
OPEC’s recent decision with Russia and other allies to boost crude output by a combined 1 million b/d may be insufficient to meet global demand in the months ahead, according to the producer group’s own forecast.
The so-called call on OPEC crude is expected to average 33.34 million b/d in the third quarter, rising to 33.58 million b/d in the fourth quarter, OPEC said in its closely watched monthly oil market report Wednesday.
That is 1.01 million b/d and 1.25 million b/d, respectively, higher than OPEC’s June production level of 32.33 million b/d, as estimated by independent secondary sources used by the organization to track output.
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Either OPEC would need to raise its output by more than it committed to, or crude would have to come out of storage, if it wishes to avoid a market squeeze.
But fears of a shortage in global spare capacity are perhaps overdone, the report hinted, as a rush of non-OPEC supplies in 2019 will reduce the pressure on OPEC to keep the taps open, even as world oil demand is set to rise above 100 million b/d for the first time.
Demand will grow 1.45 million b/d to 100.30 million b/d in 2019, but will be outpaced by the increase in non-OPEC supply of 2.10 million b/d, OPEC said in its report, which provided the organization’s first forecast of 2019 fundamentals.
As a result, OPEC sees the call on its crude falling to 31.82 million b/d in the first quarter and 32.14 million b/d in the second quarter.
“Therefore, if the world economy performs better than expected, leading to higher growth in crude oil demand, OPEC will continue to have sufficient supply to support oil market stability,” OPEC said, though it cautioned that brewing trade disputes around the world could have a chilling effect on consumer spending, investment and capital flows.
OECD commercial oil inventories stood at 2.82 billion barrels as of the end of May, 236 million barrels lower than year-ago levels and 40 million barrels below the latest five-year average, OPEC said.
PRODUCTION PLANS IN FLUX
OPEC has come under pressure from US President Donald Trump, as well as leaders from major oil consuming countries China and India, to supply more barrels to cool the market ahead of the peak summer demand season, and Saudi Arabia, OPEC’s largest producer, has indicated that it may be heeding those calls.
The kingdom self-reported June production of 10.49 million b/d, according to the OPEC report, a 460,000 b/d increase from May and far in excess of its quota of 10.06 million b/d. Secondary sources pegged Saudi production a touch lower, at 10.42 million b/d.
The figures suggest the kingdom was ramping up its output long before the OPEC and its 10 non-OPEC partners, led by Russia, met in Vienna on June 23 to decide on production policy.
With the coalition leaving unsettled how to allocate its agreed 1 million b/d supply increase, a six-country OPEC/non-OPEC Joint Technical Committee will meet Tuesday in Vienna to assess market conditions and discuss next steps. The committee of non-minister delegates is chaired by Saudi Arabia and also includes Russia, Kuwait, Venezuela, Algeria and Oman.
Sanctions-hit Iran and Venezuela have insisted that countries are not permitted to produce above their individual quotas that have been in force since January 2017 or else the agreement will be breached.
Saudi Arabia, however, has said that individual quotas no longer apply and that members with spare capacity — mostly the kingdom and its Gulf allies — will account for the output increase, to meet expected robust demand and offset any supply disruptions.
OPEC’s June production figure of 33.32 million b/d includes the Republic of Congo, which joined the organization last month, and is a 170,000 b/d increase from May’s output level.
Second-largest producer Iraq said it produced 4.36 million b/d in June, its 10th straight month at that level. Secondary sources estimated Iraq’s production much higher at 4.53 million b/d, a 70,000 b/d month-on-month increase and 180,000 b/d above its 4.35 million b/d quota.
Iran self-reported June output of 3.80 million b/d, unchanged from May and right at its quota. Secondary sources also pegged the country’s output at 3.80 million b/d, but said it represented a 20,000 b/d month-on-month decline.
Libya, wracked by internal divisions, suffered a 250,000 b/d decline in crude production to 710,000 b/d, according to secondary sources, while Angola saw a 90,000 b/d decline and Venezuela posted a 50,000 b/d drop.
— Herman Wang, [email protected]
— Edited by James Leech, [email protected]
Source: S&P Global Platts
