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OPEC holds supply, demand outlooks steady; call for its crude stays weak

OPEC kept unchanged its global crude oil supply and demand outlooks and said demand for its crude oil remains deflated as non-OPEC supply grows.

The organization said in its latest monthly report released Dec. 11 that it expects global oil demand in 2019 to grow by 980,000 barrels per day to an average of 99.8 million bbl/d. This is the same as OPEC's prior monthly projection.

OPEC also held its 2020 global oil demand growth outlook steady from its previous outlook. Consumption is expected to increase by 1.08 million bbl/d, to an average of 100.88 million bbl/d in 2020.

Preliminary data indicates global oil supply in November averaged 99.78 million bbl/d, up 410,000 bbl/d compared to the previous month.

According to secondary sources used to track member output, the market share of OPEC crude oil in total world production decreased to 29.6% in November, down 0.3 percentage points compared to the previous month.

OPEC said demand for its crude oil would decline into 2020. The organization held demand outlooks for 2019 and 2020 unchanged on the month at 30.7 million bbl/d and 29.6 million bbl/d, respectively.

Global crude oil prices rebounded in November, rising by $3/bbl, or 5.1% over the previous month, to settle at $62.94/bbl as efforts of countries participating in the Declaration of Cooperation have helped the global oil market to remain relatively balanced, OPEC said.

OPEC+ — a coalition of OPEC members and other major oil producers, including Russia — agreed Dec. 6 to add another 500,000 bbl/d to the 1.2 million bbl/d cut agreed to in December 2018 and extended in July. The 1.7 million bbl/d cut will be instituted in January 2020 and continue through March 31, 2020. OPEC+ members are expected to address a possible extension of the cuts when the group meets again March 5-6, 2020.

The non-OPEC oil supply growth forecast of 1.82 million bbl/d year over year, meanwhile, was steady to the previous outlook as downward revisions to production from the U.K., other European nations, India and Indonesia were fully offset by upward production adjustments in Thailand and Russia. The U.S., Brazil, China, Canada, Australia and the U.K. are the key drivers of 2019 oil supply growth, while Mexico and Norway are projected to see the largest declines.

For 2020, the non-OPEC supply growth forecast of 2.17 million bbl/d, to an average of 66.46 million bbl/d, was unchanged from the previous outlook. The outlook is made uncertain by the trend of investment discipline by U.S. independents, pipeline constraints in Canada, drilling and completion activity in the U.S., and Mexico's efforts to overcome natural decline, OPEC said.

World oil supply and demand are tied to global economic growth, which OPEC pegged at 3.0% for 2019 and 2020, unchanged from prior forecasts.

OPEC said global economic growth slowed in 2019 as trade issues led to a reduction in global final consumption and caused investment growth to decelerate. The slowdown, however, has likely bottomed out, and the negative trend in industrial production in 2019 is expected to reverse in 2020, OPEC said.

"Recent progress on various trade agreements such as the conclusion of the Regional Comprehensive Economic Partnership of Asian-Pacific nations may provide the base to re-energize the momentum in global trade," the report said.

However, the cartel warned that challenges remain, particularly regarding ongoing trade talks between the U.S. and its trade partners, most notably China.