OPEC is bracing for a difficult 2019 and has revised down its demand growth forecast again for the fifth straight month due to uncertainties about overall global economic development, its analysis arm said Tuesday.
In its closely watched monthly report, it said growing non-OPEC supply next year means demand for its crude is expected to fall 1.1 million b/d to 31.50 million next year.
This comes as the oil minister of OPEC's largest producer Saudi Arabia hinted OPEC and its producer allies would need to cut 1 million b/d from October production levels to avoid a supply glut in early 2019.
"The recent downward revision to the global economic growth forecast and associated uncertainties confirms the emerging pressure on oil demand observed in recent months," it said.
OPEC revised its oil demand growth forecast to 1.29 million b/d for next year, putting demand at 100.08 million b/d in 2019 from 98.79 million b/d in 2018.
OPEC admitted that despite the oil market reaching "a balance now," 2019 is littered with uncertainties.
"Non-OPEC supply growth indicates higher volumes outpacing the expansion in world oil demand, leading to widening excess supply in the market," the report said.
The report also revised up its non-OPEC supply growth figure for 2019 to 2.23 million b/d, reaching an average of 62.09 million b/d.
"The US, Brazil, Canada and the UK are expected to be the main growth drivers, while Mexico, Norway, Indonesia and Vietnam are projected to see the largest declines," it said.
PUMP NOW, CUT LATER
One of the key metrics for OPEC is the call on its crude, which basically measures demand for its own crude.
It estimates demand for its crude at 32.60 million b/d this year, around 30,000 b/d lower than what it produced in October.
But for 2019 it anticipates the call on its crude to slump to 31.50 million b/d, a decline of more than a 1 million b/d from the 32.90 million b/d it pumped last month.
However, OPEC continued to pump more volumes to the market.
The 32.90 million b/d OPEC produced in October, according to secondary sources, was up 127,000 b/d from the previous month largely due to huge rises in Saudi Arabia and the UAE.
Saudi output rose to 10.63 million b/d in October, up 127,000 b/d from the previous month, according to secondary sources.
The kingdom self-reported a larger rise of 141,000 b/d to 10.64 million b/d, only 8,000 b/d below its all-time high of 10.72 million b/d in November 2016.
Second-largest producer Iraq kept its output unchanged at 4.65 million b/d, according to secondary sources, though it self-reported production of 4.46 million b/d, unchanged for the last six months.
Sanctions-hit Iran saw its production slide 156,000 b/d to 3.30 million b/d in October, secondary sources estimated, though it did not self-report a number to OPEC.
The UAE self-reported an all-time high of 3.27 million b/d, while secondary sources reported a production figure of 3.16 million b/d, up 142,000 b/d from September.
Despite recent output gains, OPEC is now under pressure to cut output next year to prevent a supply glut.
A six-country monitoring committee overseeing the OPEC/non-OPEC supply accord met on Sunday, and decided that the coalition would need to consider a new strategy to maintain market balance, including reversing the 1 million b/d production increase agreed in June. OPEC and its allies meet on December 6-7 to make a final decision on its road ahead for next year.
