The Organisation of the Petroleum Exporting Countries (OPEC) expects demand for its oil to fall next year, as global supplies, particularly in US shale continue to rise.
The cartel said that it forecasts oil supplies of non-OPEC countries to sell by as much as 2.16 million barrels a day in 2019, with output driven primarily by the US, Russia, Brazil and the UK, according to its latest monthly report.
In response, the cartel has said that it will cut production by around one million barrels a day next year to 31.4 million barrels pumped in 2019.
‘After a healthy start to the year, the world economy in 2018 was marked by a rising divergence in growth trends,’ OPEC said in a statement.
‘Rising trade tensions, monetary tightening and geopolitical challenges are among the issues that skew economic risks even further to the downside in 2019.’
Oils oversupply concerns
The decision to cut back on supply next year comes amid an oil market plagued by oversupply which has seen the price of crude lose more than 30% of its value since October.
All major oil producing nations, including Saudi Arabia, Russia and the US have all substantially increased out and kept it high for a prolonged period of time, resulting in the creation of a oil environment that is reminiscent, and precepted, the 2014 downturn.
Traditionally, oil producers agree to cut supply in an effort normalise prices, but with signs that the global economy is beginning to cool and national economies struggling feeling the pinch, there is pressure on governments to keep oil prices low.
Minor cuts help stabilise oil price
Earlier this month, OPEC and non-member countries convened in Vienna, with Russia agreeing to cut back on oil production by as much as 1.2 million barrels a day in a bid to stabilise prices.
The move defied populist US President Donald Trump who has been pressuring oil producing nations to maintain output levels to keep prices at the pump down.
After the news that supply would be cut, the price of oil rallied above $60 dollars a barrel, where it has remained, with Brent Crude trading at around $61 on Wednesday, while WTI Crude sits a touch over $52.