Opec downbeat on 2018, 2019 demand growth

Opec has revised down its forecasts for 2018 and 2019 demand growth and lifted its forecast of non-Opec supply growth for this year. It has kept its 2019 non-Opec supply growth forecast all but flat.

It has cut its outlook for the call on its own crude by 200,000 b/d to 32.7mn b/d in 2018 — this is 800,000 b/d below 2017. It has reduced its 2019 forecast by 300,000 b/d to 31.8mn b/d.

In its Monthly Oil Market Report(MOMR), Opec pared 2018 demand growth by 80,000 b/d to 1.54mn b/d, putting demand at 98.79mn b/d. The revision is driven by new data for OECD Europe and the Middle East. OECD Europe demand growth is now put at just 50,000 b/d this year. For next year, global growth is trimmed by 50,000 b/d to 1.36mn b/d, giving total demand of 100.15mn b/d. The growth engines are India and China. OECD demand growth in 2019 is put at just 250,000 b/d, and OECD Asia-Pacific demand growth is mildly negative for both years.

Non-Opec supply growth this year is put at 2.22mn b/d, higher by 200,000 b/d from last month's MOMR, taking supply to 59.77mn b/d. The 2019 growth forecast is 2.12mn b/d, a trivial reduction from the previous report, putting non-Opec output at 61.89mn b/d with uncertainties skewed to the upside.

The increased forecast for 2018 non-Opec output centres on the US, where production growth has been lifted by 145,000 b/d from Opec's previous report. The forecast for Russia is up by 36,000 b/d. Opec expects US tight oil growth next year to drop to 96,000 b/d from 1.32mn b/d this year, largely because of continuing pipeline constraints.

Opec's compilation of production data for its member countries from secondary sources — of which Argus is one — indicates a month-on-month rise in output of 132,000 b/d, with the increase since July some 479,000 b/d, suggesting Opec and its non-Opec partners are well short of adding the 1mn b/d to supply they targeted at their June ministerial meetings. This is despite relatively modest estimates of the fall off in Iranian production as US sanctions loom. Iran's output, according to secondary sources, only fell by 150,000 b/d in September from August.

Saudi Arabia told Opec it produced 10.5mn b/d in September, an increase of 90,000 b/d from the figure it gave for August. The UAE said it boosted production by 78,000 b/d and Nigeria by 47,000 b/d. Iran said its output dipped by 51,000 b/d to 3.755mn b/d, which is around 300,000 b/d more than secondary source estimates.

OECD stocks in August amounted to 59.3 days of demand, a rise of 0.5 days on July but 2.5 days below the rolling five-year average.