Crude Oil Prices to Settle Lower as OPEC Lowers Oil Demand Growth Outlook
As per the latest OPEC monthly report released on 11th October, oil demand growth for the year 2018 is projected to increase by 1.54 mb/d, 80 tb/d lower than last month’s projections. This mainly reflects revisions in the oil demand data from Latin America, OECD Europe and the Middle East. Total oil demand for 2018 is anticipated to reach 98.79 mb/d. For 2019, world oil demand is forecast to grow by 1.36 mb/d, also some 50 tb/d lower than last month’s assessment. As a result, total world consumption is anticipated to reach 100.15 mb/d. Oil demand growth is projected to be driven by Other Asia, led by India, followed by China, and OECD America. In 2019, OECD demand is forecast to grow by 0.25 mb/d, while non-OECD countries will drive oil demand growth by adding an estimated 1.11 mb/d.
On the other hand, Non-OPEC oil supply growth in 2018 was revised up by 0.20 mb/d from the previous MOMR to an average 59.77 mb/d, representing an increase of 2.22 mb/d on a yearly basis. The main reason for this upward revision in US, Canada, Kazakhstan and Brazil, while Mexico Norway Indonesia and Vietnam will probably show largest declines. Total Non-OPEC supply for 2018 is now estimated at 59.77 mb/d. Non-OPEC oil supply forecasts for 2019 remains subject to many uncertainties, with potential skewed to the upside. Non-OPEC supply is forecasted to average 61.89 mb/d for the year 2019. In September, OPEC production increased by 132 tb/d to average 32.76 mb/d, according to secondary sources.
Consistently, preliminary data for August showed that total OECD commercial oil stocks rose by 14.2 mb m-o-m to stand at 2,841 mb. This was 165 mb lower than the same time one year ago, and 47 mb below the latest five-year average. Crude stocks indicated a deficit of 6 mb, while products stocks witnessed a deficit of 41 mb. However, OECD commercial stocks remain 271 mb above the January 2014 level. In terms of days of forward demand cover, OECD commercial stocks rose by 0.5 days m-o-m in August to stand at 59.3 days.
For the coming weeks, we are estimating Global Crude prices to remain bearish as the overall global demand has plunged citing trade disputes and volatility in emerging markets. Moreover, OPEC sees a fall in demand for the year 2019 if the trade tensions escalates. Additionally, the 15-nation producer group also said several members raised their oil output in September in order to offset a drop in production from Iran, where U.S. sanctions are cutting into the country’s exports. Furthermore, if the US Crude Inventories witness continuous rise, then we could possibly see further downtrend in global oil prices.
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