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Improved economic outlook in 2020 bodes well for oil demand, supply growth: OPEC

Highlights

Raises 2020 demand, non-OPEC supply estimates

Demand for its crude will average 29.50 mil b/d in 2020

OPEC says it pumped 29.44 mil b/d of crude in Dec

London — A rise in oil demand growth this year will be offset by a sharper increase in non-OPEC supply, the producer group said in its monthly oil market report published Wednesday.

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"Continued accommodative monetary policies, coupled with an improvement in financial markets, could provide further support to ongoing increases in non-OPEC supply," the report said, adding that OPEC+ cuts remain essential in maintaining stability in the oil market.

This comes a month after the producer group and its allies decided to deepen its output cuts from 1.2 million b/d to 1.7 million b/d from January through March 2020.

The pace of supply growth will continue to outpace oil demand, further putting pressure on interest for OPEC crude, which means it may need to keep its cuts going to balance the oil market.

OPEC said demand for its crude will average 29.50 million b/d in 2020, which is 60,000 b/d above what it produced in December.

However, demand for its crude from January to March this year, which is the duration of its current cuts, will average 29.19 million b/d.

Demand for OPEC crude averaged 30.60 million b/d in 2019.



Saudi output lowest since Sep

The group's 14 members pumped 29.44 million b/d in December, compared with 29.61 million b/d in November, according to secondary sources.

The fall was due to declines in nine of its members, led by Saudi Arabia.

Saudi Arabia's crude output slid 296,000 b/d to 9.59 million b/d last month, according to official figures self-reported to OPEC.

This is the lowest since September when the kingdom's production slumped due to attacks at its Khurais and Abqaiq oil facilities.

However, secondary sources used by OPEC to monitor output -- including S&P Global Platts -- pegged Saudi Arabia's December output slightly higher, at 9.76 million b/d.

Saudi Arabia's energy minister pledged to that the kingdom will keep production steady at 9.744 million b/d in January and February, in line with its promise to produce 400,000 b/d below its official OPEC+ quota during the first quarter.

Iraq continued to produce over its quota in December, though production has fallen in the last few months.

Nigerian crude production in December was in line with its quota of 1.77 million b/d, according to secondary sources.



Supply outpacing demand

Oil demand growth for 2020 was revised up by 140,000 b/d to 1.22 million b/d.

This upward revision was due to a better economic outlook for 2020 in various economies, buoyed by improved trade sentiment between the US and China.

For 2019, the report showed that oil demand growth only grew by 930,000 b/d.

Non-OPEC supply is projected to grow by 2.35 million b/d to 66.68 million b/d in 2020.

The key drivers of growth include the US, Brazil, Norway, Russia, Canada, Kazakhstan, and Australia, while there are expected to decline in Indonesia, Thailand, Egypt, and Colombia.

Non-OPEC supply averaged 64.34 million b/d in 2019, a year-on-year growth of 1.86 million b/d.

OPEC noted that US crude output is "continuing to increase, despite the pullback in drilling, as companies are running through their inventories of drilled but uncompleted (DUC) wells."

US crude oil production in 2020 is forecast to grow by 980,000 b/d to 13.18 million b/d.

OPEC and its allies plan to meet March 5-6 in Vienna to review their production cut agreement and decide whether to extend them.