OPEC on Thursday cut the forecast of global demand for its crude this year as rivals boost production, building a case for extending supply curbs beyond June to stop any new glut.
Continued supply reductions would further support oil prices, which are up about 25 per cent this year, and incur the wrath of U.S. President Donald Trump, who has demanded OPEC ease its efforts to bolster the market.
In a monthly report, the Organization of the Petroleum Exporting Countries said 2019 demand for its crude would average 30.46 million barrels per day, 130,000 bpd less than forecast last month and below what it is currently producing.
OPEC, Russia and other non-OPEC producers, an alliance known as OPEC+, are reducing output by 1.2 million bpd from Jan. 1 for six months. The report said rising production outside the group pressed the need for continued supply restraint by OPEC+.
“While oil demand is expected to grow at a moderate pace in 2019, it is still well below the strong growth expected in the non-OPEC supply forecast for this year,” OPEC said in the report.
“This highlights the continued shared responsibility of all participating producing countries to avoid a relapse of the imbalance and continue to support oil market stability in 2019.”
OPEC sources have said an extension of the supply-cutting pact is the likely scenario. The group and its allies are due to meet in April and June to discuss policy.
In the report, OPEC said its oil output fell by 221,000 bpd month-on-month to 30.55 million bpd in February. That amounts to 105 per cent compliance with pledged cuts, according to a Reuters calculation, up from January’s rate.
While Saudi Arabia kept production even lower than required by the deal, the largest drop from January’s rate occurred in Venezuela, whose exports have been disrupted by U.S. sanctions.
Despite this strong compliance, market indicators followed by OPEC still suggest a glut could appear. OPEC’s report said oil inventories in developed economies were above the five-year average in January.