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London — OPEC on Wednesday held its forecast for the world's reliance on its oil next year unchanged, despite a weaker demand outlook, ahead of a key OPEC+ ministerial meeting to assess its current output curbs and country-level quotas.

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Global demand for OPEC's crude will average 29.40 million b/d in 2020 despite a slowdown in oil demand growth due to ongoing economic headwinds in key markets, the producer group's analysis arm said in its latest monthly oil market report.

In 2020, world oil demand is projected to increase by 1.08 million b/d, a 60,000 b/d downward adjustment from OPEC previous assessment. OPEC pointed to an economic slowdown in the US and the eurozone, lower-than-expected growth in India, rising sovereign debt issues in Argentina, and the continuation of the US-China trade dispute.

"This highlights the shared responsibility of all producing countries to support oil market stability to avoid unwanted volatility and a potential relapse into market imbalance," OPEC said in the report.

OPEC, Russia and nine other allies in July agreed to extend their collective 1.2 million b/d supply cut agreement through Q1 2020. A nine-country Joint Ministerial Monitoring Committee, co-chaired by Saudi Arabia and Russia, is scheduled to meet Thursday tasked with monitoring market conditions, assessing compliance with production quotas, and making policy recommendations to the wider coalition.

OIL SUPPLY OVERHANG

OPEC's latest oil market outlook, however, suggests that the producer group will need to make deeper production cuts in order to keep the market balanced next year. Based on OPEC's forecast for global oil demand and its production levels last month, oil markets would be oversupplied by 340,000 b/d on average in 2020.

The oversupply would be deepest in Q2 next year, widening to almost 750,000 b/d, according to the report. OPEC cut its estimate of demand for its oil sharply by 390,000 b/d in the second quarter of 2020 to 29 million b/d, reflecting a sharp slowdown in US shale growth.

For this year, the demand forecast for OPEC's oil was cut to 30.61 million b/d, 80,000 b/d below its previous forecast. OPEC said it now sees world oil demand in 2019 growing by 1.02 million b/d, which is also 80,000 b/d lower than last month's forecast.

OPEC's report comes a day after the co-head of oil trading at commodities trading house Trafigura, Ben Luckock, told S&P Global Platts that oil prices are likely to head towards $50/b in the next six months in light of the global economic slowdown unless OPEC makes larger production cuts (see story at 0341 GMT).

On stocks, OPEC noted that OECD commercial inventories fell by 10.5 million barrels in July to stand at 2.944 billion barrels, which is 36 million barrels above the latest five-year average.

US SHALE SHOWDOWN

On supply, OPEC said it pumped 29.74 million b/d in August, up 136,000 b/d on July, according to an average of the six secondary sources used by the organization to track member output, including S&P Global Platts.

Crude oil output increased mostly in Saudi Arabia, Nigeria, Iraq and the UAE, while it declined mainly in Venezuela, Iran, Libya, Kuwait and Algeria. SaudiArabia was the biggest driver of the increase, the figures show, pumping 118,000 b/d more on July at 9.8 million b/d. OPEC's kingpin, however, continues to produce well below its OPEC quota of 10.31 million b/d as Riyadh seeks to lead by example on the cuts.

OPEC revised its non-OPEC oil supply growth forecast for 2020 by 136,000 b/d to 2.25 million b/d to reflect mainly a slowdown in drilling and completion inthe US onshore shale plays due to $60/b oil prices. OPEC now expects US oil production in 2020 to grow by 1.54 million b/d, a 165,000 b/d downward revision to its previous estimates.

"The forecast for next year remains subject to many uncertainties, mainly relevant to capital-spending discipline and a slowdown in drilling and completionactivity in the US," OPEC said.

OPEC also trimmed its non-OPEC supply estimate for 2019 by 10,000 b/d to 1.99 million b/d, with upward revisions to production from Russia, Kazakhstan, Australia and Canada offsetting the downward revision to its forecast for the US.

--Robert Perkins, robert.perkins@spglobal.com

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