The Organization of the Petroleum Exporting Countries (OPEC) and its allies are mulling options, including a further cut in oil supplies ahead of their December meeting, according to OPEC Secretary-general Mohammad Barkindo, even as the forecast sees gloom ahead with slower global growth and lower demand in 2020.
The OPEC + which consists of OPEC, Russia and other producers, have already implemented a deal (on till March 2020) to cut oil output by 1.2mb barrels per day to support the struggling market. The producers are to meet on Dec.5-6 this year to set policy.
Speaking at a press briefing in London, Barkindo said, “The conference will take appropriate, strong, positive decisions that will set us on the path of heightened and sustained stability for 2020.”
According to a press report, the Secretary General said that all options were open when asked if there would be deeper oil supply cuts on the anvil.
“As we approach December, we will be faced with real data for 2020 which will enable us to probably review the current arrangement and come up with a decision that probably will cover the whole of the year,” he added.
Oil prices have been faltering amid supply disruptions, including the Saudi oil field attacks that is said to have shut down more than half of production from the global leading exporter.
According to data, Brent crude LCOc1 was trading near $58 a barrel, down from a 2019 high near $75 in April. Weak economies, Brexit and the China-US trade dispute all seem to have factored into overshadowing the lower supply. When OPEC + met in July, they decided on the supply for the next nine months with the Vienna meeting to find a longer and sustaining solution.
Meanwhile, the organisation’s monthly oil report cut down the forecast for world economic growth in 2020 to 3% from 3.1%, saying “it seems increasingly likely that the slowing growth momentum in the U.S. will carry over to 2020.”
Barkindo, who was speaking to the press at the annual Oil & Money conference, however offered a more optimistic view saying that the 2020 data was just preliminary and there could be an upside.
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The report continues to see a drop in demand for OPEC crude next year with predictions for crude to average 29.6mn bpd, a drop of 1.2mn bpd from 2019. If the pumping levels were those before the Saudi attacks (August’s rate) then that would infer a surplus of about 200,000bpd.
According to the OPEC, the group’s production was 1.32mn bpd lower month-on-month at 28.49 million bpd, in September, largely due to the Saudi attacks. The 2020 forecast that global oil demand would grow in 2020 by 1.08mb bpd remains unchanged.
OPEC’s outlook echos that of IMF’s new managing director Kristalina Georgieva, who has predicted slower growth across the globe this year.
“In 2019, we expect slower growth in nearly 90 per cent of the world,” Georgieva announced in her first major speech after assuming her position on October 1. “The global economy is now in a synchronised slowdown. This widespread deceleration means that growth this year will fall to its lowest rate since the beginning of the decade.
“Two years ago, the global economy was in a synchronized upswing. Measured by GDP, nearly 75 per cent of the world was accelerating. Today, even more of the world economy is moving in synch, but unfortunately, this time growth is decelerating,” she said.
Georgieva’s speech came just one week ahead of the IMF’s release of its World Economic Outlook, which will show downward revisions for 2019 and 2020.
