Organization of the Petroleum Exporting Countries (OPEC), in its latest report, showed a slight decrease in the forecast of global oil demand. The report showed that the demand is lowered to 1.10 Mn barrels per day for the rest of 2019 which is down by 0.04 Mn barrels per day compared to a month ago. The estimation may end up being too optimistic. The organization said that the forecast is subjected towards downside risks curtailing from uncertainties pertaining to global economic development. Additionally, OPEC said that with a significant outpacing demand growth, the global supply should grow by 1.97 Mn barrels per day this year. The figure is less than 72,000 barrels per day from the previous estimate. This is attributed to low production growth in the US, Brazil, Norway, and Thailand. According to OPEC, oil inventories in Organization for Economic Cooperation and Development (OECD) countries rose from 31.8 Mn barrels in June to 67 Mn barrels over the five-year average.
This has increased the pressure on the cartel’s de facto leader, Saudi Arabia. It has been assumed that the oil prices will rise in the face of shrinking demand and a large influx of new shale supplies from the US owing to a decrease in production. Crude oil prices fluctuated this week as President Donald Trump imposed higher tariffs on Chinese goods. He further touted negotiations to resolve the stalemate. In London, at just 60 US$ a barrel, crude oil prices are lower than the levels. Due to this, government spending has to be covered by most OPEC countries.
The alliance of oil producers is composed of members of the OPEC, Russia, and other allies. It has restricted the oil supply this year in an attempt to maintain balance in the global market. Riyadh has curtailed its output by far than the initial commitment. It also reported to the OPEC secretariat that it will again reduce production to 9.58 Mn barrels per day in July. The global balance of demand and supply is tightened than a month ago. The OPEC has increased its consumption assessment to 50,000 barrels per day for this year and next year. The supply forecast for non-OPEC countries is projected to be 40,000 barrels per day in 2019 and 90,000 barrels per day in 2020. Although oil inventories in developed countries have exceeded average levels, the global stock will fall by an average of 2.1 Mn barrels per day this quarter. OPEC’s daily throughput is about 29.6 Mn, while the daily demand is 30.28 Mn which is somewhat bearish