Opec reassures on supply, gives 2019 forecasts

Opec today moved to reassure on its ability to support oil market stability, even should global demand grow faster than its new forecast.

Non-Opec supply growth is likely to accelerate slightly next year, to 2.1mn b/d from 2mn b/d in 2018, while global demand growth will slow, according to Opec's latest Monthly Oil Market Report (MOMR). That puts call-on-Opec crude at 32.9mn b/d this year, some 500,000 b/d less than it was in 2017, and at 32.2mn b/d in 2019.

"If the world economy performs better than expected, leading to higher growth in crude demand, Opec will continue to have sufficient supply to support oil market stability," Opec said.

Opec agreed last month with its non-Opec allies led by Russia to boost production back to 100pc compliance with the cuts levels agreed at the end of 2016. Argus data show compliance by Opec producers, excluding exempt members Nigeria and Libya and new member Congo (Brazzaville), was 125pc in June. Total Opec and non-Opec production agreement overcompliance amounted to 290,000 b/d.

Citing secondary sources, of which Argus is one, Opec today said its production — including Congo (Brazzaville) — increased by 173,000 b/d last month from its adjusted figure for May, to 32.33mn b/d.

According to June figures directly supplied to Opec, Saudi Arabia increased its production by 459,000 b/d from May, to 10.49mn b/d. Output from Venezuela and Iran was little-changed at 1.53mn b/d and 3.8mn b/d respectively.

Non-Opec supply, which now excludes Congo (Brazzaville), will average 59.54mn b/d this year and 61.64mn b/d in 2019, according to the report. Non-Opec supply growth was revised up by 180,000 b/d for 2018 compared with last month's MOMR.

"The main growth drivers [in 2019] are expected to be the US, followed by Brazil, Canada, Australia, Kazakhstan and the UK, while Mexico, China and Norway are expected to witness the main declines," it said. "The pace of US shale growth will slow down considerably in the second half of 2018 and continue into 2019 as the Permian faces take-away capacity constraints."

US supply will grow by 1.4mn b/d next year after expanding by 1.7mn b/d in 2018, according to Opec. US tight-crude production growth will slow to 1.09mn b/d in 2019 from 1.22mn b/d this year.

Opec puts global demand growth at 1.65mn b/d this year, little changed from last month's assessment, and at 1.45mn b/d in 2019, with average consumption exceeding 100mn b/d.

"The non-OECD region is anticipated to lead oil demand growth in 2019 with initial projections indicating an increase of around 1.18mn b/d, most of which is attributed to China and India," Opec said. "Additionally, a steady acceleration in oil demand growth is projected in Latin America and the Middle East."