OPEC cuts oil demand outlook, building case to keep supply curbs

EIA Oil Report

EIA Oil Report

OPEC on June 13 cut its forecast for growth in global oil demand due to escalating trade disputes and pointed to the risk of a further reduction, building a case for prolonged supply restraint in the rest of 2019.

The oil producer group and its allies meet in the coming weeks to decide whether to maintain supply curbs, with some having become alarmed by a steep slide in prices, despite United States (US) President Donald Trump pressing for action to lower prices. "This has resulted in a slowdown in global economic activities, and weaker growth in global oil demand".

"Throughout the first half of this year, ongoing global trade tensions have escalated", OPEC said in the report, adding that the potential for these disputes to affect global demand poses "significant downside risks".

OPEC, along with non-members including Russian Federation, has limited oil output by 1.2 million barrels per day since the start of the year to prop up prices.

British crude oil settled at $70 a barrel, whereas U.S. Brent Crude fell by $8 and traded at $51 per barrel.

OPEC, Russia and other producers have implemented a deal since January 1 to cut output by 1.2 million bpd.

OPEC is set to meet on June 25, followed by talks with its allies led by Russian Federation on June 26.

"In the first three months of 2019, the volume of USA crude oil imports from Saudi Arabia and Iraq - the two largest sources of imports from OPEC in 2018 - have averaged 26% and 28% below their 2018 average levels", EIA reported.

Stocks in April exceeded the five-year average - a yardstick OPEC watches closely - by 7.6 million barrels.

Oil prices jumped about 2% on Thursday following a suspected attack on two tankers in the Gulf of Oman near Iran and the Strait of Hormuz, through which a fifth of global oil consumption passes.

Also supporting oil bulls were signs that OPEC members were close to agreeing on continued production cuts. Production by all 14 OPEC members dropped by 236,000 bpd from April to 29.88 million bpd.

Supply from Iran posted the biggest decline, by 227,000 bpd, as Washington tightened the screw on Iranian exports.

This suggests there will be a 2019 supply deficit of over 600,000 bpd if OPEC keeps pumping at May's rate and other things remain equal.

The incident followed last month's nearby sabotage attacks on vessels off the Fujairah emirate, one of the world's largest bunkering hubs.