20/08/2019 09:56 AST

The global oil demand growth forecast for 2019 remains at 1.14 million barrels per day (mb/d), with expectations for global oil demand to reach 99.87 mb/d, said Opec in its July monthly outlook for the oil market.

In 2020, the initial forecast indicates growth of around 1.14 mb/d year-on-year (y-o-y), as global oil demand is anticipated to surpass the 100 mb/d threshold on an annual basis, to average 101.01 mb/d for the year, the outlook from the Organization of Petroleum Exporting Countries (Opec) said.

The OECD is forecast to register growth of 0.09 mb/d with the bulk of growth coming from OECD Americas. The non-OECD region is expected to continue leading oil demand growth in 2020 with initial projections indicating an increase of around 1.05 mb/d, most of which is attributed to Other Asia and China, with a combined oil demand growth of 0.68 mb/d.

World oil supply

The non-Opec oil supply growth forecast for 2019 has been revised down by 95,000 b/d to reach 2.05 mb/d y-o-y, standing at 64.43 mb/d.

The downward revisions are mainly due to the extension of the voluntary production adjustments by participating oil producing countries of the Declaration of Cooperation, as well as downward revisions for Brazil and Norway in 2Q19.

In 2020, non-Opec oil supply is projected to grow by 2.4 mb/d, averaging 66.87 mb/d. The US, Brazil, Norway and Canada are forecast to be the main growth drivers, while Mexico, Colombia, the UK, Indonesia and Thailand are expected to see the largest declines. Opec NGL production is expected to grow by 0.07 mb/d in 2019 to average 4.84 mb/d, and is forecast to increase by 0.03 mb/d in 2020 to average 4.87 mb/d. In June, Opec crude oil production decreased by 68 tb/d to average 29.83 mb/d, according to secondary sources.

World oil demand in 2020 World oil demand in 2020 is forecast to grow by 1.14 mb/d y-o-y, in line with the current year estimates, Opec said in the outlook.

The OECD is forecast to grow by 0.09 mb/d next year, with only OECD Americas showing positive growth, while OECD Europe and Asia Pacific are anticipated to continue to decline. In the non-OECD, oil demand is expected to increase by around 1.05 mb/d.

The transportation sector is anticipated to lead growth on strong demand for motor and aviation fuels. Demand from the petrochemical sector will remain strong, although it will ease slightly in the US due to lower ethane cracking capacity additions.

Factors that could influence the pace of oil demand growth in 2020 include macroeconomic developments in major consuming countries, the displacements of heavy distillates with natural gas and other fuels, subsidy programmes and plans for their removal, the effect of commissioning/delays/closures of mega projects in the downstream and fuel efficiency programmes, especially in the transportation sector.

Non-Opec oil supply is forecast to grow by 2.4 mb/d in 2020, higher than in the current year. This is mainly due to the debottlenecking of oil infrastructure in North America and new project ramp ups in Brazil, Norway and Australia. In contrast, natural decline in Mexico, Indonesia, Colombia and Egypt is foreseen to offset some of this growth.

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 2.5 mb/d of new pipeline capacity in the Permian is expected to become operational by July 2020.

Investment by exploration and production (E&P) companies in the US is expected to reach around $180 billion next year, with the tight oil sector forecast to spend some $124 billion.

Meanwhile, non-Opec supply growth is expected to be supported by startups of a number of fields in 2020, including Norway's Johan Sverdrup as well as assets in Lula, Lapa, Laraand the Buzios fields in Brazil. However, factors such as the drive for capex discipline, geopolitical tensions, unplanned outages, extended field maintenance, delays in infrastructure de-bottlenecking, as well as oil price developments will remain the key uncertainties affecting supply growth.

Based on the above forecasts, the demand for Opec crude is expected to average 29.3 mb/d in 2020, down by around 1.3 mb/d from 2019. In light of the uncertainties affecting the global oil market and in an effort to avoid a destabilising build-up in oil inventories, Opec and non-Opec countries participating in the Declaration of Cooperation agreed to extend voluntary production adjustments until 31 March 2020, reaffirming their continued commitment to promote and enhance oil market stability.

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