OPEC Cautions Against Glut Relapse as Output Increases in August
OPEC cautioned producers not to pump too much crude against the backdrop of waning global economic growth.
(Bloomberg) -- OPEC cautioned producers not to pump too much crude against the backdrop of waning global economic growth.
Global oil demand is now forecast to grow at about a million barrels a day this year amid the ongoing trade war between the U.S. and China, the Organization of Petroleum Exporting Countries said in its monthly Oil Market Report, down 80,000 barrels a day from last month’s report. That comes as output from within the group rose in August -- driven by Saudi Arabia and Nigeria -- while rival producers are set to see their production surge through the end of next year.
OPEC production rose by 136,000 barrels a day in August, according to the group’s secondary sources, while Saudi Arabia and Nigeria lifted output by about 200,000 barrels a day combined. A Bloomberg survey earlier this month saw OPEC production 200,000 barrels a day higher in August. The organization also revised lower its demand growth forecast for 2020 by 60,000 barrels a day.
With producers set to meet in Abu Dhabi on Thursday, focus has returned to the group’s compliance with agreed reductions to output. Ministers have been making pledges to improve their adherence to cuts in recent days, with Nigeria saying that it would attempt to comply soon, while Iraq said it is committed to shrinking production but has difficulties in complying. As well as its own output levels, OPEC is wrestling with an increasingly fragile demand outlook and surging production from nations outside of the group.
“This highlights the shared responsibility of all producing countries to support oil market stability to avoid unwanted volatility and a potential relapse into market imbalance,” the group said.
Despite the monthly increase in overall output, secondary sources recorded new lows in both Iranian and Venezuelan output. The Persian Gulf state pumped 2.2 million barrels a day in August, while Venezuelan production fell to 712,000 barrels a day.
Though OPEC revised its U.S. production growth forecast for 2020 sharply lower at 1.54 million barrels a day, it said that production from outside the group is still set to surge, thanks to increases in Brazil, Norway, Russia and Canada. The U.S. forecast for next year remains subject to many uncertainties, the group said, mainly due to capital spending discipline and a slowdown in drilling activity.
To contact the reporter on this story: Alex Longley in London at alongley@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net, Christopher Sell, John Deane
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