Opec secretary general optimistic of surge in demand, with non-member supplies unlikely to show
Opec sees a significant upswing in oil demand growth for 2020 as potential supply from non-member producers is unlikely to materialise in the near term, according to its secretary general.
Opec, a 14-member group of sovereign oil-exporting states, lowered its five-year outlook for the collective oil supply by 7 per cent last week.
Production of crude and other liquids is set to decline to 32.8 million barrels per day by 2024, compared with 35 million bpd for this year, Opec said in its annual World Oil Outlook.
“Yes there is that potential at the moment because the numbers that we’re reviewing in non-Opec supply are not likely to materialise,” Mohammed Barkindo said in the UAE capital on the sidelines of the Abu Dhabi International Petroleum Exhibition and Conference.
Rising production from the US and the changing global narrative on fossil fuels are among the reasons for lower demand growth for crude, with the US-China trade war and a slowing economy also driving down appetite.
The International Energy Agency has cut its forecasts for oil demand growth by 100,000 barrels per day for this year and next. The agency cited the trade dispute and a decelerating global economy as the reasons for its downward revision.
Opec’s Mr Barkindo dismissed concerns of a recession, saying there was significant potential for the upstream oil industry, supported by economic and demand fundamentals.
“The global economy is weathering the intermittent storms as a result of the trade negotiations in monetary terms, but in terms of the total quantum of global growth, the global economy [maintains] growth of 3 per cent for 2020, therefore there is no cause for alarm,” said Mr Barkindo.
“On the contrary, there is potential for upstream in both global economic growth as well as demand growth for 2020,” he said.
The secretary general said concerns remain about the lack of investment in upstream, which he said still languished at levels seen during a steep decline in oil prices in 2014-16.
“We have not yet recovered from the slump of 2014-16 in investments. What we have seen in 2017-18 is only very marginal [increases] in investments,” he said.
Oil prices fell to lower than $30 per barrel at the beginning of 2015 due to a build-up of global inventories, which depressed the market.
Brent futures were down 1.07 per cent trading at $61.84 per barrel at 4.15pm UAE time on Monday, while the West Texas Intermediate benchmark was down 1.29 per cent at $56.50 per barrel.