Opec trims forecasts as global economy weakens and supply surges

Opec has trimmed demand forecasts for its crude in 2019, leading to speculation that the oil cartel will cut production when it meets next month.

Publishing its monthly production report, Opec said it expected world oil demand growth to grow by 1.29m barrels per day (b/d) year-on-year, around 70,000 b/d lower than October’s forecast and well below the 1.45m b/d it predicted in July.

Global demand for Opec crude would be around 31.5m b/d next year, 1.4m b/d below current production, it added.

The 15-nation group, which includes Saudi Arabia, Iran, Iraq and Venezuela, blamed the global economy. Opec has pencilled in global economic growth of 3.5% for 2019, held back by “a slowing dynamic amid rising trade tensions, monetary tightening, particularly in the US, and the mounting challenges in emerging markets and developing economies”.

A surge in supplies from countries outside of the cartel, especially the US and Russia, is also undermining demand for Opec oil and has seen the price of Brent crude fall from $85 a barrel in October to below $70.

Faced with falling demand and growing inventories from both Opec and non-Opec suppliers, the cartel is now increasingly expected to cut production when it meets in December in Vienna.

On Monday, Opec Secretary General Mohammad Barkindo said the growth in non-Opec supply was “alarming” and that he saw a case for cutting production by 1m b/d. It was a sentiment echoed by Saudi Arabia, which said Opec needed to do “whatever it takes to rebalance the market”.

In response, US President Donald Trump tweeted that he hoped Opec would not cut production because oil prices “should be much lower based on supply”. It was the latest in a series of at times barbed tweets from the President aimed at Opec, which Trump blames for the high cost of crude.