<article><p class="lead">Opec's first outlook on supply and demand for 2020 suggests that rebalancing the oil market may require longer and deeper output cuts than those envisaged under its recently renewed production pact with its non-Opec partners. </p><p>Opec's latest <i>Monthly Oil Market Report</i> (<i>MOMR</i>) forecasts that global oil demand will rise by 1.14mn b/d next year, the same level of growth as projected for this year. But it forecasts the pace of non-Opec supply growth to accelerate to 2.44mn b/d in 2020, compared with a downwardly revised 2.05mn b/d in 2019.</p><p>These projections leave the call on Opec crude at 29.27mn b/d next year, 1.34mn b/d lower than this year and more than 400,000 b/d below <i>Argus'</i> assessment of <a href="https://direct.argusmedia.com/newsandanalysis/article/1935269">Opec production in June</a>.</p><p>Last week Opec and a group of non-Opec partners agreed to extend their production cuts into next year in an effort to stem rising global inventories. The pact means that the group — collectively known as Opec+ — will constrain output by a combined 1.2mn b/d from now until the end of March next year. </p><p>The 11 Opec states participating in the deal produced 400,000 b/d below their collective ceiling in June, <i>Argus</i> estimates, with Saudi Arabia still shouldering the bulk of the reductions. And Riyadh <a href="https://direct.argusmedia.com/newsandanalysis/article/1937682">has signalled today</a> that it plans to continue undershooting its quota in July-August.</p><p>The latest <i>MOMR</i> projections have laid bare the challenges faced by the Opec+ alliance in meeting its stated goal of reducing global inventories. While the extension of the output restraint deal has contributed to a 95,000 b/d reduction in projected non-Opec supply growth this year, the pace of growth next year is forecast to accelerate. This will be driven by new projects in Brazil, Australia and Norway, including the Johan Sverdrup field in the North Sea, and new pipeline capacity in the US. </p><p>"US tight crude production is anticipated to continue to grow as new pipelines will allow more Permian crude to flow to the US Gulf coast export hub. More than 2.5mn b/d of new pipeline capacity in the Permian is expected to become operational by July 2020," the<i> MOMR</i> said.</p><p>Global oil demand growth will struggle to keep pace. Opec expects demand to increase by 1.14mn b/d in 2020, unchanged from 2019 forecast growth. </p><p>"The OECD is forecast to grow by 90,000 b/d, with Americas being the only OECD region in positive growth territory," the MOMR said. "In the non-OECD region, oil demand is anticipated to add 1.05mn b/d, with most of the growth coming from 'other Asia', particularly India, followed by China."</p></article>
