OPEC cut to oil demand outlook builds case to keep supply curbs
OPEC has cut its forecast for global oil demand growth and
warned of potential further cuts as international trade disputes continue to
fester, building a case for prolonged supply restraint over 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 US President Donald Trump pressing
for action to lower prices.
World oil demand will rise by 1.14 million barrels per day
(bpd) this year, 70,000 bpd less than previously expected, the Organization of
the Petroleum Exporting Countries said in a monthly report published on
Thursday.
“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, Russia and other producers have, since Jan. 1, implemented
a deal to cut output by 1.2 million bpd. They meet over June 25-26 or in early
July to decide whether to extend the pact.
Despite the supply cut, oil has tumbled to $61 a barrel from
April’s 2019 peak above $75, pressured by fears over the US-China trade dispute
and an economic slowdown, though prices jumped 4% on Thursday after suspected
attacks on two oil tankers in the Gulf of Oman.
Vienna-based OPEC also said its output fell in May as US
sanctions on Iran boosted the impact of the supply pact. Production by all 14
OPEC members dropped by 236,000 bpd to 29.88 million bpd, OPEC said.
In addition to lowering its demand forecast, OPEC said that
oil inventories in developed economies rose in April, suggesting a trend that
could raise concern over the possible build up of an oil glut.
Stocks in April exceeded the five-year average – a yardstick
OPEC watches closely – by 7.6 million barrels.