Opec on Wednesday cut its forecast for world oil demand growth in 2020 on the backdrop a global slowdown, setting the stage for a possible decision today by the group and its allies on further output reduction or on keeping the current level.
Opec, Russia and other producers, which had implemented a crucial deal to cut output by 1.2 million bpd until March 2020 in a bid to avert a glut, are meeting today in Abu Dhabi to review the market trends and ponder on more cuts if needed to prop up prices.
In a monthly report, the oil exporters group said oil demand worldwide would expand by 1.08 million barrels per day, 60,000 bpd less than previously estimated, and indicated the market would be in surplus.
According to a revised forecast, demand for Opec crude will average 29.40 million bpd in 2020, down 1.2 million bpd from this year.
The group also revised down its forecast for world economic growth in 2020 to 3.1 per cent from 3.2 per cent.
Analysts said the weaker outlook amid a US-China trade war and Brexit could press the case for Opec and its allies to maintain or adjust their policy of cutting output.
The group also expects non-Opec production to rise by nearly two mbd this year and 2.25 mbd next year, largely due to gains in the United States.
"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," Opec report said.
Oil prices pared an earlier gain after the report was released to sit just below $63 a barrel. Despite the Opec-led cut, oil has tumbled from April's 2019 peak above $75, pressured by trade concerns and an economic slowdown. Oil prices have risen more than seven per cent this month, supported by declines in global inventories and signs of an easing in trade tensions.
Mihir Kapadia, the CEO of Sun Global Investments, said oil prices have been rising as optimism surrounding production cuts continues to grow.
"Prince Abdulaziz's (new Saudi energy minister) recent comments that Opec would not change its current policy of cutting oil production by 1.2 million barrels per day, has been taken as a proactive move by Saudi Arabia and Opec. It has given traders some much needed confidence as the trade dispute and slowing global economy continue to weigh heavily on the markets. However, there will need to be concrete progress between now and the next few weeks if markets are to have a positive outlook going for 2020," said Kapadia. - email@example.com