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Efforts to rebalance the oil market could be in vain after the International Energy Agency cut its oil demand growth forecasts for both 2019 and 2020 and pointed to strong non-OPEC supply driven by the US. the Norway and Brazil especially next year.
The Paris-based agency lowered oil demand growth for 2019 by 100.000 b d to 1.1 million b d and trimmed 2020 demand growth to 1.3 million b d amid concerns around a weakening global economy and greater uncertainty over the US-China trade dispute.
`The outlook is fragile with a greater likelihood of a downward revision than an upward one.` the IEA noted.
Meanwhile. the global oil market remains well supplied despite OPEC`s large production cuts and continued losses from Venezuela and Iran.
The IEA highlighted that while global oil supply in July fell below year earlier levels for the first time since November 2017. it remained above 100 million b d.
OPEC and its allies have been determined in trying to bring the market back into balance with the IEA stating it saw `OPEC oil production fall by 2 million b d versus July 2018` led by Saudi Arabia.
`In a clear sign of its determination to support market re-balancing. Saudi Arabia`s production was 0.7 million b d lower than the level allowed by the output agreement.
If the July level of OPEC crude oil production at 29.7 million b d is maintained through 2019. the implied stock draw in H2 2019 is 0.7 million b d. helped also by a slower rate of non-OPEC production growth.` the IEA said.
`Although the third quarter has begun from a position of relatively abundant supply. continued restraint from OPEC and non-OPEC members of the OPEC+ pact could see global inventories draining by a significant amount.` the agency added.
OPEC and its allies have agreed to cut production by 1.2 million b d through to the end of the first quarter of 2020 and they has shown strong compliance.
However. the IEA was also quick to point out it would be a `temporary phenomenon` because of very strong non-OPEC production growth next year and that the oil market will be well supplied.
The agency indicated non-OPEC supply was up 1.4 million b d year-on-year in July and is set to grow by 1.9 million b d in 2019 and 2.2 million b d next year.
It`s a bleak reading for OPEC. with the IEA highlighting a potential oil market glut in early 2020 when the call on OPEC crude oil plunges to 28.4 million b d.
