Earlier, the Organization of Petroleum Exporting Countries (OPEC) released its Jun-19 Monthly Oil Market Report (MOMR). According to the report, the cartel revised its demand growth forecast for 2019 lower (by 70,000bpd to 1.14mbpd), citing trade tensions and geopolitics as threats to global output growth. Meanwhile, OPEC’s aggregate production fell to a fresh 5-year low after touching 29.9mbpd, largely traceable to the fall in Iranian oil production which accounted for c.96% of the total decline in OPEC production.
With the existing OPEC+’s 1.2mbpd supply cut agreement set to expire this month, the cartel and its allies are set to meet early next week (between 1st and 2nd of Jul-19), mainly to discuss the success or otherwise of the current agreement amongst others. Indeed, increased protectionist stance across the globe and geopolitical concerns have cast uncertainty over the near-term growth in oil demand. At the same time, the cartel’s effort is compounded by increased growth in non-OPEC supply. In a separate report, the IEA estimates that non-OPEC supply will grow to 2.3mbpd (from1.9mbpd) in 2020.
Overall, at its next meeting, we expect OPEC+ to, at least, keep its 1.2mbpd supply cut agreement, barring any surprises from the non-OPEC allies. Yet, in the medium to long term, the cartel faces the problem of weakening demand and relentless supply growth from non-OPEC countries.
United Capital Plc Research (UCR)
