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OPEC maintains 2019 crude oil demand forecast

By
Renzo Pipoli
OPEC on Wednesday kept its projection for an increase in world crude demand in 2019 of 1.29 million barrels per day, while it reduced its non-OPEC supply growth projection. Photo by jplenio/Pixabay
OPEC on Wednesday kept its projection for an increase in world crude demand in 2019 of 1.29 million barrels per day, while it reduced its non-OPEC supply growth projection. Photo by jplenio/Pixabay

Dec. 12 (UPI) -- OPEC on Wednesday kept its global crude oil demand growth forecast for next year at 1.29 million barrels per day, while also reporting that during November greater Saudia Arabia output compensated for lower Iranian production as Venezuela extended its long, steady decline.

In line with recent announcements of production cuts, non-OPEC oil supply growth in 2019 was revised down by 0.08 million barrels per day to stand at 2.16 million barrels per day, and is now forecast to reach an average of 62.19 million barrels per day, OPEC said.

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"This is mainly due to a lower oil supply forecast for Canada given Alberta's announcement of a mandatory production adjustment, as well as downward supply forecast adjustments for the 10 non-OPEC participants in the Declaration of Corporation in the first half of 2019" that resulted from an accord in Vienna last week with OPEC.

OPEC and non-OPEC producing nations that participated agreed in Vienna to jointly reduce output by a total 1.2 million barrels per day, with OPEC accounting for 0.8 million barrels per day. The move is an attempt to help crude oil prices, with Brent down from a peak of $86 per barrel on Oct. 3 to current levels under $61 per barrel, as of Wednesday morning.

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"The U.S., Brazil, Russia and the United Kingdom are the main drivers for next year's growth, while Mexico and Norway are expected to see sizeable declines," OPEC said.

As for projected consumption, "in 2019, world oil demand is anticipated to rise by 1.29 million barrels per day to average 100.08 million barrels per day, unchanged from last month's report."

In November, OPEC had reduced its demand projection for 2019 by 70,000 barrels per day, in its fourth monthly cut. The revision, at a time when crude prices were fast declining, contributed to extend the oil prices rout.

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According to OPEC information from secondary sources, Iranian crude oil production showed the biggest decline among members in November, as it fell by 380,000 barrels per day to 2.95 million barrels per day. However, this was roughly offset by a 377,000 barrel-per-day increase in Saudi Arabian production in November from the previous month.

Iranian crude oil production has declined from a 3.8 million barrel-per-day average during the first half of the year. The decline occurred as the United States announced in May nuclear related sanctions against the country, aimed at preventing it from obtaining revenue from crude exports.

However, on Nov. 5, as sanctions against Iran and any country buying its oil went into effect, the United States suddenly announced waivers so that eight nations, including the three biggest Iranian oil buyers, could continue purchases.

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Crude prices fell sharply in November on concern this created an oversupply in the market, given the sudden waivers announcement.

Saudi Arabia had announced in October, shortly after Brent prices hit a peak of over $86 per barrel, that it was ramping up production in a bid to cover for any potential supply disruption resulting from the Iran sanctions.

OPEC did not provide any information from Iran for November production based on direct communication.

After Iran, the biggest decline in production from October to November by a member country was that of Venezuela, where crude oil production, according to secondary sources, fell 52,000 barrels per day to an average just under 1.14 million barrels per day.

This secondary source report compares to Venezuelan official communication to OPEC that it had managed to increase 31,000 barrels per day to a total 1.46 million barrels daily production during November, OPEC said.

OPEC relies on secondary sources to better approximate actual production.

Venezuelan crude oil production is seeing an involuntary decline that is the result of mismanagement of the state oil company PDVSA by the administration of President Nicolas Maduro, according to reports.

Fewer functional rigs due to lower capital investment, and a lack of qualified management and personnel, has led to situations such as missing payments to service providers, according to a report earlier this year by the United States' Energy Information Administration.

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Venezuelan production has reached lows not seen since the state oil company PDVSA workers, at the time considered qualified, carried out a strike in late 2002, and into early 2003, in a failed bid to oust former President Hugo Chavez.

Venezuelan production is down from 1.9 million barrels per day in 2017, and from 2.2 million barrels per day in 2016.

The country has the world's biggest reserves but has been unable to recover production. Last week Maduro said that Russia would contribute to a $5 billion injection to try to help Venezuela recover lost oil output.

OPEC's total production in November, according to secondary sources it cited, was nearly 32.97 million barrels per day, just 11,000 barrels per day lower than in October.

OPEC will become a 14-member organization starting next year after Qatar pulled out last week.

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