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OPEC sees the demand for its oil decline in 2020 and suggests a surplus

VIENNA, AUSTRIA – 2018/06/20: The logo of OPEC is visible in the building of the Organization of Petroleum Exporting Countries (OPEC) in Vienna.
The 174th meeting of OPEC will take place on June 22, 2018 in Vienna. (Photo by Omar Marques / SOPA Images / LightRocket via Getty Images)

SOPA Images | LightRocket | Getty Images

The OPEC announced Thursday that global demand for its crude would decline next year, rivals producing more, thus highlighting a return to a surplus, despite a pact aimed at limiting supplies. under the aegis of OPEC.

The Organization of the Petroleum Exporting Countries reported in a monthly report its first forecast for 2020 that the world would need 29.27 million barrels of crude oil per day (bpd) from its 14 members year-round next, a decrease of 1.34 million bpd from this year.

The decline in OPEC crude oil demand highlights the continued impetus that OPEC's policy of supporting prices through supply cuts is giving American shale and other competing offers. This potentially gives US President Donald Trump more leeway to maintain sanctions against Iran and Venezuela, members of OPEC.

"US crude production is expected to continue to grow, as new pipelines will allow more Permian crude to reach the US Gulf Coast export center," said OPEC, using another term for shale oil.

In the report, OPEC also predicted that world oil demand would grow at the same pace as this year and that the global economy would grow at a rate this year, despite slowing growth in the United States. and in China.

"The forecast for 2020 assumes that no downside risk materializes, especially that trade-related issues do not worsen further," said OPEC on the economic outlook.

"Brexit presents an additional risk, as well as the ongoing slowdown in manufacturing activity."

OPEC and its allies renewed last week a supply reduction pact until March 2020, stressing the need to avoid an accumulation of stocks that could affect prices.

OPEC also said its oil output in June had fallen from 68,000 barrels a day to 29.83 million barrels a day, above forecasts of demand for 2020.

This suggests that there will be a supply surplus of more than 500,000 b / d by 2020 if OPEC continues to pump at the June rate and all other things being equal.

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