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London — OPEC's analysis arm on Wednesday painted an extremely tight supply picture for the rest of the year, saying demand for the organization's own crude oil will be almost 1 million b/d more than the level produced in August.

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This shows that producer group will have to bring more barrels into the market to avoid a supply squeeze.

In 2018, demand for OPEC crude is expected at 32.91 million b/d, with demand for the second half to average 33.50 million b/d, the monthly market report showed.

But it warned that market tightness will ease in 2019, as it expects the call on its own crude in 2019 to fall to 31.20 million b/d due to the rapid growth in non-OPEC supply.

OPEC said the current state of the world economy and geopolitics will come increasingly into focus in the next few months, impacting the global oil markets.

"Going forward, economic uncertainty, and hence questions surrounding global oil demand, coupled with geopolitical tensions, will need to be factored into maintaining a balanced market in the months to come," the report said.

PRODUCTION STRATEGY

OPEC produced 32.57 million b/d in August, according to secondary sources, up 278,000 b/d from July.

Saudi Arabia, OPEC's largest producer, saw its output rise modestly to 10.40 million b/d, up 38,000 b/d from the previous month, according to secondary sources.

The kingdom self-reported a larger rise of 124,000 b/d to 10.41 million b/d.

Second-largest producer Iraq boosted its output 90,000 b/d to 4.65 million b/d, according to secondary sources, though it self-reported production of 4.46 million b/d, unchanged from July.

Iran saw its production drop 150,000 b/d to 3.58 million b/d in August, secondary sources estimated, though it self-reported steady production of 3.81 million b/d.

Libya was the biggest gainer in the month, boosting production 256,000 b/d to 926,000 b/d, while Nigeria (74,000 b/d) also saw steady gains, according to secondary sources.

A six-country monitoring committee overseeing the OPEC/non-OPEC supply accord will meet September 23 in Algiers to assess market fundamentals and potentially make output policy recommendations.

Expectations are the Joint Ministerial Meeting Committee will discuss the need to further increase output to cover potential shortages in the market as production from Iran and Venezuela continues to slump.

OPEC and 10 non-OPEC partners agreed on June 23 to boost output by 1 million b/d by reducing overcompliance with cuts that had been in place since January 2017.

SUPPLY AND DEMAND

OPEC nudged downward its forecasts of year-on-year oil demand growth for both 2018 and 2019 mainly due to the recent slower-than-expected performance by non-OECD Latin America and the Middle East.

World demand will average 98.82 million b/d in 2018, a demand growth of 1.62 million b/d.

In 2019 demand will grow 1.41 million b/d to 100.23 million b/d, it added.

In its latest report, OPEC revised down slightly its non-OPEC supply in 2018 saying it will average 59.56 million b/d

This was due to a "downward adjustment in the supply forecast for Brazil, the UK, India, Malaysia and China on lower-than-expected output" in the second half of this year.

But in 2019, non-OPEC oil supply will jump to 61.71 million b/d, with the US, Brazil, Canada, the UK, Kazakhstan, Australia, China and Malaysia being the main growth drivers.

Mexico and Norway are expected to see the largest declines but it added that the 2019 forecast is subject to many uncertainties.

OECD commercial oil inventories stood at 2.830 billion barrels as of July, 43 million barrels below the five-year average but 194 million barrels lower than the July 2018 level.

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

--Edited by James Leech, james.leech@spglobal.com