OPEC cuts oil demand outlook, building case to keep supply curbs
* OPEC output falls because of supply pact and Iran
* Cuts 2019 forecast for oil demand growth by 70,000 bpd
* Oil stocks increase, remaining above five-year average
* Points to 2019 supply deficit at current OPEC production
* Oil surplus or deficit: https://tmsnrt.rs/2Rf9w2p
(Adds link to graphic)
By Alex Lawler
LONDON, June 13 (Reuters) - OPEC has cut its forecast for
growth in global oil demand due to trade disputes and pointed to
the risk of a further reduction, building a case for prolonged
supply restraint in the rest of 2019.
The producer group and its allies meet in the coming weeks
to decide whether to maintain supply curbs. Some members are
worried about a steep slide in prices, despite demands from U.S.
President Donald Trump for action to lower the cost of oil.
World oil demand will rise by 1.14 million barrels per day
(bpd) this year, 70,000 bpd less than previously expected, the
Organization of the Petroleum Exporting Countries said in a
monthly report published on Thursday.
"Throughout the first half of this year, ongoing global
trade tensions have escalated," OPEC said in the report.
"Significant downside risks from escalating trade disputes
spilling over to global demand growth remain."
OPEC, Russia and other producers have since Jan. 1
implemented a deal to cut output by 1.2 million bpd. The
alliance, known as OPEC+, is due to meet on June 25-26 or in
early July to decide whether to extend the pact.
Despite the supply cut, oil has tumbled to $62 a
barrel from April's 2019 peak above $75, pressured by concern
over the U.S.-China trade dispute and an economic slowdown,
though prices jumped 4% on Thursday after suspected attacks on
two oil tankers in the Gulf of Oman.
In addition to lowering its demand forecast, OPEC said oil
inventories in developed economies rose in April, suggesting a
trend that could raise concern over a possible oil glut.
Stocks in April exceeded the five-year average - a yardstick
OPEC watches closely - by 7.6 million barrels.
Still, the report implies that OPEC will under-supply the
market in 2019, even with the weaker demand outlook.
OPEC's share of the agreed oil supply reduction is 800,000
bpd, but the report showed producers were cutting much more.
Vienna-based OPEC said its output fell in May as U.S.
sanctions on Iran boosted the impact of the supply pact.
Production by all 14 OPEC members dropped by 236,000 bpd from
April to 29.88 million bpd.
Supply from Iran posted the biggest decline, by 227,000 bpd,
as Washington tightened the screw on Iranian exports.
Top exporter Saudi Arabia made a further voluntary cut,
helping to offset increases in Iraq and Angola.
The 11 OPEC members required to cut output achieved 143%
compliance in May with pledged curbs, Reuters calculated,
compared with 150% initially reported in April.
OPEC estimates it needs to provide an average of 30.52
million bpd in 2019 to balance the market, a figure lowered by
60,000 bpd month-on-month due to the weaker outlook for global
This suggests there will be a 2019 supply deficit of over
600,000 bpd if OPEC keeps pumping at May's rate and other things
remain equal. Last month's report had indicated a smaller
(Editing by Dale Hudson and David Goodman)
First Published: 2019-06-13 12:41:29
Updated 2019-06-13 16:52:59
© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.