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 U.S. 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 U.S.-China trade dispute and an economic slowdown, though prices jumped 4 per cent 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 U.S. 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.