Published: Wed, February 13, 2019
Economy | By

OPEC cuts 2019 oil demand forecast on global slowdown

OPEC cuts 2019 oil demand forecast on global slowdown

Saudi Arabia will reduce oil production to nearly 9.8 million barrels per day in March, Minister of Energy, Industry and Mineral Resources and Chairman of Saudi Aramco Khalid Al-Falih told the Financial Times.

World oil demand will grow more slowly this year, OPEC said, and non-OPEC production will rise more rapidly than expected.

Reports stated that Saudi Arabia will reduce its oil production to around 9.8mbpd in March (10.25mbpd according to Refinitiv), as such, this would see Saudi crude production 500kbpd below its 2019 target (10.311mbpd). OPEC is lowering output by 800,000 bpd from January 1.

Mars, a medium crude grade from the U.S. Gulf, has moved to a rare premium over Louisiana Light Sweet.

At the moment the barrel of WTI is up 1.36% at $53.98 facing the next hurdle at $ $55.59 (2019 high Feb.4) ahead of $57.55 (100-day SMA) and then $58.00 (high Nov.16 2018).

Production has been hampered by corruption, political interference and lack of foreign investment and technology to maintain existing fields and develop new ones.

Crude supply will average 12.41 million barrels a day this year and 13.2 million in 2020, the U.S. Energy Information Administration said on Tuesday, up more than 300,000 barrels a day from the previous month's estimates. A day later, the EIA confirmed the inventory build, but a smaller one at 1.3 million barrels.

Venezuela's diminished importance in the global oil market and as a supplier to the United States has emboldened the US administration to take a tough approach in attempting to oust the government of Nicolas Maduro.


U.S. oil supplies dropped by almost 1M barrels last week, API reported.

Venezuela has tried to find alternative customers, especially in Asia, but under USA pressure many buyers there are also shying away from dealing with PDVSA.

The IEA kept forecasts for global oil demand unchanged, despite signs of slowing economic growth, as consumption remains supported by lower crude prices and the startup of petrochemical projects in China and the U.S. The EIA, however, added a note of caution that US production would be capping oil price gains.

But while Venezuela's crude now accounts for a very limited share of the global oil market, it plays a much more important role in the niche market for heavy crude.

USA sanctions on Iran and Venezuela have choked off supply of the heavier, more sour crude that tends to yield larger volumes of higher-value distillates, as opposed to gasoline.

"Nevertheless, this would not lift the global economy beyond the growth forecast".

Refineries are built to handle a certain quality of crude, and those which process so-called heavy crude from Venezuela, Canada or the Middle East can not be easily converted to treat the light shale oil that is now being produced in greater quantities in the United States. "This is because, in terms of crude oil quantity, markets may be able to adjust after initial logistical dislocations", the group added.

John Kemp is a Reuters market analyst.

Like this: