World Bank: Oil Prices will be Lower in 2019-2020 Due to Sluggish Global Growth and Rising non-OPEC Supply
Global oil price touched its highest level since July - Photo by OPEC

JAKARTA (TheInsiderStories) – Global oil supply in April slightly decreased by 0.07 million barrels per day (bpd) to average 98.82 million bpd, compared with the previous month, the Organization of the Petroleum Exporting Countries (OPEC) said on Tuesday (05/15).

According to the organization’s monthly oil market report, OPEC’ crude oil production remained marginally unchanged from the previous month to average 30.03 million bpd. However, non-OPEC supply, including OPEC natural gas liquids, decreased by 0.07 million bpd month-on-month to average 68.79 million bpd, up by 2.62 million bpd year-on-year.

The fall in non-OPEC supply was mainly driven by Kazakhstan, Canada, China, and Russia, according to the report. The share of OPEC crude oil in total global production stayed unchanged at 30.4 percent in April compared with the previous month.

Crude oil output decreased mostly in Iran, Saudi Arabia, and Angola, while production increased in Iraq, Nigeria, and Libya. Iran saw declines of 164 thousand barrels per day lowering the overall production figure to around 2.5 million bpd, while crude oil production in Iraq increased by 113 thousand bpd to reach 4.6 million bpd.

Unchanged from last month’ report despite some revisions within the regions, world oil demand growth for 2019 is projected to increase by 1.21 million bpd, to average 99.94 million bpd.

Demand for OPEC crude in 2019 was revised up by 0.3 million bpd from the previous report to stand at 30.6 million bpd. However, it is 1.0 million bpd lower than the 2018 level.

Top exporter Saudi Arabia cut output despite oil prices hitting 2019 high above US$75 a barrel and United States (US) President Donald Trump urging action to lower prices.

Supply losses in OPEC members Iran and Venezuela, both under US sanctions, have deepened the impact of an OPEC-led production-limiting deal. The so-called OPEC+ group of producers meets next month to review whether to maintain the pact beyond June. Vienna-based OPEC trimmed its estimate of oil supply growth from outside the group in 2019 and said the rapid rise in production of US tight oil.

“Supply growth is likely to be slower than last year amid the expected weaker global economic growth. The US tight oil production is increasingly faced with costly logistical constraints in terms of out-take capacity from land-locked production sites” OPEC said.

OPEC, Russia and other non-member producers are reducing output by 1.2 million bpd from Jan. 1 for six months. The producers meet on June 25-26 to decide whether to extend the pact.

OPEC+ returned to output cuts this year due to concern that an economic slowdown would produce a supply glut. But demand has weakened no further for now, as OPEC kept its estimate of global growth in oil use in 2019 steady at 1.21 million bpd.

However, in a development that may raise OPEC concern, the report said inventories in developed economies rose in March, after falling in February. Stocks in March exceeded the five-year average – a yardstick OPEC watches closely – by 22.8 million barrels, more than in February. The report suggests that if OPEC kept pumping at April’s rate it would undersupply the world market in 2019.

The 11 OPEC members required to cut output achieved 150 percent compliance in April with pledged curbs, compared with 155 percent initially reported in March. OPEC estimates it needs to provide an average of 30.58 million bpd in 2019 to balance the market, a figure increased by 280,000 bpd month-on-month partly due to the lower non-OPEC supply outlook.

Written by Lexy Nantu, Email: