Markets

OPEC cuts 2019 oil demand forecast on global slowdown

OPEC cuts 2019 oil demand forecast on global slowdown

Consequently, it is likely that OPEC production would have seen a notable drop in production in January, with Saudi Arabia bearing the brunt of it.

"Oil production is rapidly falling and companies that normally resell Venezuelan crude have not found ways to mitigate the effect of the USA sanctions", Barclays bank said.

The EIA is set to release the weekly inventory report later on Wednesday, while in its Short-Term Energy Outlook (STEO) for February, the EIA said on Tuesday that "After two consecutive months of price declines, crude oil prices increased throughout January and into February as global oil supplies declined relatively quickly".

On the supply side, Saudi Arabia, the defector leader of OPEC, said it was cutting daily production and exports by a further 500,000 barrels per day (bpd) on top of its agreed OPEC quota reduction.

It also slightly downgraded its forecast for growth in global demand in 2019 from 1.29 million barrels per day to 1.24 million.

Production has been hampered by corruption, political interference and lack of foreign investment and technology to maintain existing fields and develop new ones.

USA crude output is expected to grow by 1.45 million bpd this year and by another 790,000 bpd next year to hit 13 million bpd in 2020, according to the Energy Information Administration.

Saudi Aramco is the world's biggest oil company, producing ten million barrels of oil a day and managing 260 billion barrels in reserves. Any economic slowdown could cap oil markets.




Venezuela has tried to find alternative customers, especially in Asia, but under USA pressure many buyers there are also shying away from dealing with PDVSA.

In the meantime, the political rift between Venezuela and the United States continues with the USA sanctions against the South American nation giving prices a slight boost.

Global oil cartel Opec said Tuesday it sharply reduced crude oil production last month, after heavyweight Saudia Arabia slashed output and exports fell in crisis-hit Venezuela.

Heavy crudes are much harder to refine and tend to contain significant quantities of sulfur and other impurities that are costly to remove, which is why they sell at a hefty discount to medium and light oils.

Mid-distillates are especially prized at the moment with the forthcoming introduction of new bunker fuel regulations by the International Maritime Organization from the start of 2020.

"Nevertheless, this would not lift the global economy beyond the growth forecast".

John Kemp is a Reuters market analyst.