OPEC’s secretariat urged oil producers to keep going with efforts to prevent a surplus this year, as supplies from their rivals increase faster than world demand.
Key Opec members and their allies will meet this weekend in Baku, Azerbaijan, to review output curbs they’ve been implementing to avert a supply glut and defend oil prices. Their agreement is due to expire at the middle of the year. In its monthly report, OPEC’s Vienna-based secretariat encouraged them to continue the strategy.
“While oil demand is expected to grow at a moderate pace in 2019, it is still well below the strong growth expected in the non-Opec supply forecast for this year,” it said. “This highlights the continued shared responsibility of all participating producing countries to avoid a relapse of the imbalance and continue to support oil-market stability in 2019.”
A rally in oil prices during the first six weeks of the year has slowed on concerns that record US shale production, a slowing global economy and the prolonged US-China trade dispute could lead to a pile-up of unwanted crude. Brent futures traded below $68 (Dh250) a barrel in London on Thursday.
After the review meeting on March 17 and 18, ministers from the so-called Opec+ alliance will gather in Vienna next month, and again in June, to decide on output policy for the second half of the year. The coalition spans 24 nations, including Opec members as well as other producers such as Russia and Kazakhstan.
In its monthly report, the Organisation of Petroleum Exporting Countries trimmed forecasts for world oil demand and boosted projections for non-Opec supply, particularly in the second half of the year. As a consequence, it indicated the risk of a renewed surplus emerging in the fourth quarter, even as the group’s output declines as a result of planned and involuntary cutbacks.
Production from OPEC’s 14 members dropped by 221,000 barrels a day to 30.55 million a day in February, according to the report. Although that reflected deliberate reductions by Saudi Arabia, Iraq and Kuwait as they implement the deal to balance markets, the single biggest decline was in Venezuela, which is being roiled by economic turmoil and American sanctions.
Output from the Latin American nation slumped by 142,000 barrels a day in February to just over 1 million barrels a day, the report showed. The country’s crisis appeared to enter a new phase this week, with widespread electricity blackouts hitting oil-production facilities.
If Opec keeps production at current levels, global oil inventories should tighten during this quarter and the next, the report indicated. But a glut could re-emerge in the fourth quarter when demand for OPEC’s crude will be about 720,000 barrels a day lower than the group’s current output.