OPEC on Tuesday reported a slash in its global oil demand forecasts for this year and next as commodity prices slump on weakening market.
The decision came barely 24 hours after Saudi Arabia, the largest oil producer, announced plans to cut output as a strategic option of bolstering prices.
The oil cartel, in its latest monthly report covering October, noted that demand was expected to increase 1.5 million barrels per day (mbd) this year, down 40,000 mbd from its previous estimate, to give a daily total of 98.79 mbd.
It stated that the drop in global demand reflected lower-than-expected demand in the Middle East and to a lesser degree in China.
OPEC also projected that in 2019, demand will likely grow by 1.29 mbd to 100.08 mbd, representing some 70,000 mbd less than in the September report.
On the supply side, the cartel reported that non-OPEC states, led by the United States, were likely to increase output.
It reported: “Although the oil market has reached a balance now, the forecasts for 2019 for non-OPEC supply growth indicate higher volumes outpacing the expansion in world oil demand, leading to widening excess supply in the market.
“The recent downward revision to the global economic growth forecast and associated uncertainties confirm the emerging pressure on oil demand observed in recent months”, OPEC added.
Recall that while US President, Donald Trump, had mounted pressure on OPEC members to produce more oil to offset the impact of sanctions on Iran, Saudi Arabia has tried to bolster prices by cutting output, most notably under a successful 2016 accord which included Russia.
However, prices have recently maintained some slide thereby making Saudi Arabia on Monday to advise OPEC members and other oil producers to cut output by one million barrels per day, of which it would account for 500,000 barrels.
Citing secondary sources, the report stated further that OPEC’s own October output increased by 127,000 bpd compared with September to total 32.90 mbd, about a third of the global total supplies to the weakening oil market.