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OPEC expects tighter oil market amid renewed geopolitical tensions

London — OPEC's analysis arm said Tuesday that it expects the global oil market to tighten further in the coming months amid renewed geopolitical tensions but kept its 2019 oil demand growth figure steady as the "upside potential for global economic growth in 2019 remains limited."

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In its monthly oil market report, OPEC estimates that demand for its crude will average 30.58 million b/d in 2019, a fall of 1.01 million b/d on the year, suggesting that global oil inventories are going to decline sharply from current levels.

But the report also showed a surprise rise in crude inventories in the last few months, suggesting that there may still be need for the producer group to continue its output cuts to balance the market.

The group's 14 members pumped 30.031 million b/d in April, compared with 30.034 million b/d in March, according to OPEC secondary sources.

This is 549,000 b/d lower than the call on its own crude. Demand for OPEC crude in 2018 averaged 31.59 million b/d.

This report comes after key oil infrastructure and transit routes in the Middle East have been hit by attacks of sabotage in the past few days.

Tensions over threats to oil flows from the Middle East escalated Tuesday after an attack halted flows through Saudi Arabia's main oil transport pipeline to terminals and refineries on the Red Sea.

OPEC also noted that non-OPEC upstream sanctioning activity appears set to reach an all-time high of $26.5 billion this year, marking the start of a new cycle of investment.

"The total capital expenditure for non-OPEC's tight oil -- which consists mainly of the US -- will be around $124 billion in 2019," it said.

OPEC warned that non-OPEC growth in 2019 is likely to be slower than last year amid expected weaker global economic growth and due to costly logistical constraints especially in the US.

"North American producers will continue facing pressure by shareholders demanding capital discipline and a return on their investments, and this could come at the expense of increased disposable capex," the report added.

OECD commercial oil inventories rose marginally to 2.88 billion barrels in March and were 22.8 million barrels above the five-year average, according to OPEC's report.

In December, stocks were 28 million barrels above the five-year average, showing that the producer group has made progress in balancing the market.

US total commercial oil stocks rose by 26.5 million barrels to stand at 1.225 billion barrels in April, according to preliminary data.

OIL DEMAND AND SUPPLY GROWTH

OPEC's research and analysis arm kept its estimate for global oil demand growth steady at 1.21 million b/d.

Global oil demand is now estimated to average 99.94 million b/d this year, compared with 98.73 million b/d in 2018, OPEC said. The group pegged 2018 global oil demand growth at 1.41 million b/d.

OPEC marginally revised down non-OPEC oil supply growth in 2019 by 33,000 b/d to 2.14 million b/d.

Total non-OPEC supply for the year is now projected to average 64.52 million b/d, with the UK, Brazil, Russia, Australia, Ghana, South Sudan and Sudan forecast to be the main drivers for this year's growth. Mexico, Kazakhstan, Norway, Indonesia and Vietnam are projected to see the largest declines.

It forecasts US crude production will rise by 1.44 million b/d in 2019 to 12.40 million b/d.

But OPEC said that US oil projects are beginning to show delays as producers are reportedly curbing spending and are not able to increase production due to limited pipeline capacity.

OUTPUT CUTS

OPEC crude output remained largely rangebound in April, with output falling 3,000 b/d from the previous month to 30.031 million b/d.

Saudi Arabia's crude output fell to 9.74 million b/d in April from 9.79 million b/d the previous month, according to an average of the six secondary sources that OPEC uses to gauge production.

The kingdom self-reported production of 9.81 million b/d last month, from 9.79 million b/d in March. That is much below its quota of 10.31 million b/d under the cut agreement.

At the last OPEC meeting in Vienna, the group's members agreed to slash output by 812,000 b/d, with Russia and nine other non-OPEC allies committing to a cut of 383,000 b/d for the first six months of 2019.

Iraq's production rose sharply to 4.63 million b/d in April, much above its quota of 4.51 million b/d, according to OPEC secondary sources. But OPEC's second-largest producer self-reported an output figure of 4.50 million b/d for April, unchanged from March.

In Iran, hit by US sanctions, and the removal of US waivers on its key customers, production slumped to 2.55 million b/d in April, down 164,000 b/d from the previous month.

Venezuela reported a production figure of 1.037 million b/d, up 77,000 b/d from March, as power outages and US sanctions continue to cripple the South American oil producer.

-- Eklavya Gupte, eklavya.gupte@spglobal.com

-- Edited by James Leech, newsdesk@spglobal.com