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Despite the oil market reaching equilibrium, forecasts for 2019 for non-OPEC supply growth indicate higher volumes outpacing the expansion in world oil demand, according to Opec’s latest monthly report.
‘The recent downward revision to the global economic growth forecast and associated uncertainties confirms the emerging pressure on oil demand observed in recent months,’ the report said.
The intergovernmental organisation revised oil demand forecasts, with it expecting growth of 1.29m barrels a day next year, representing a 70,000 b/d fall compared with October’s forecast and a sharp decline when compared to the 1.45m b/d Opec forecast in July.
There is growing concern among oil producers about the impact of a global economic slowdown, worsening trade tensions and currency weakness in emerging market economies and how these myriads of headwinds will hurt demand.
OPEC and participating non-OPEC countries in the DoC will next meet at the beginning of December to assess market developments and consider how best to continue their cooperation over the coming period.
As it stands, there are growing concerns that Opec could increase supply, prompting another era of oversupply, with the market only recently getting a respite from the previous oil crisis that emerged in 2014.
Just two years ago, oil producing countries and energy companies emerged from a multi-year downturn that put the industry under considerable pressure with oil prices going into freefall.
OECD commercial inventories measured by the difference to the latest five-year average – a key indicator of the health of the oil market – reached a record high of more than 400 mb in July 2016, clearly reflecting a huge excess of supply.
In response to this critical situation, OPEC and non-OPEC oil producing countries undertook voluntary productions adjustments aimed at reducing the oil stock overhang and accelerating the rebalance between supply and demand.