Tepid growth in demand for oil along with ample supplies from outside OPEC will complicate efforts by the cartel and its allies to boost prices, the International Energy Agency (IEA) said in a report yesterday.
The IEA cut its forecast for oil demand growth this year for the second straight month and trimmed its second-quarter forecast as well.
While in its first estimates for next year the IEA sees oil demand accelerating, this is more than matched by output gains from nations outside OPEC+ — a 24-member coalition informally referred to as the “Vienna Group.”
It put the increase of non-OPEC supplies at 2.3 million barrels per day (mbd) next year, while global demand is seen as increasing by 1.4mbd.
This year, the 1.9mbd increase in non-OPEC supplies is also expected to outweigh the 1.1mbd increase in demand.
“A clear message from our first look at 2020 is that there is plenty of non-OPEC supply growth available to meet any likely level of demand,” the IEA said.
“This is welcome news for consumers and the wider health of the currently vulnerable global economy, as it will limit significant upward pressure on oil prices,” said the Paris-based institution, which provides advice to oil-consuming nations.
The data come as ministers from OPEC+ nations are due to meet later this month to debate whether to continue their production restraints.
With the IEA saying its forecast “means the tightening of oil markets could prove short lived”, OPEC+ nations might have to consider stepping up their cuts to maintain leverage on prices.
While the IEA added the caveat that its outlook assumes no major geopolitical shock, it also noted that OPEC countries have ample spare production capacity thanks to the cuts they have implemented.
The IEA’s latest monthly report came a day after attacks on two tankers in the Gulf of Oman, which caused oil prices to briefly increase more than 4 percent, in the second spate of incidents in a month in the strategic shipping lane.
With about 40 percent of the world’s seaborne oil passing through the Strait of Hormuz, a disruption to shipping could roil markets.
The attacks come amid rising tensions between Tehran and Washington as the US has intensified sanctions on Iran over its nuclear program.
The IEA said that the US sanctions have not yet completely cut off Iranian oil exports, but they have fallen drastically.
Iran’s crude production fell 210,000 barrels to 2.4mbd last month, when exports plunged by 480,000 to 810,000 barrels per day as Washington pulled the last waivers for other nations to buy Iranian oil.
That export level is less than a third of what it was exporting a year ago.
The IEA said that it was becoming increasingly difficult to determine where Iranian oil was being shipped as Iran’s national oil company shut off satellite tracking systems on its ships.