OPEC Lowered Its Forecast For Falling Oil Demand
OPEC has diminished its forecast for a decline in global oil demand due to the coronavirus pandemic: by the end of 2020, demand is expected to fall by 9.07 million barrels per day, which is 2.23 million barrels higher than the previous forecast, according to the organization's may report.
In particular, the forecast for a decline in oil demand in the OECD countries has deteriorated by 1.2 million barrels per day; in non-OECD countries-by 1.03 million barrels per day. Thus, the demand for oil in the world in 2020 is expected to reach 91.1 million barrels per day.
According to OPEC, the most severe drop in demand in the world's largest oil consumers will be in the second quarter of 2020. "The reduction in demand in 2020 may be mitigated by a faster-than-expected easing of government measures to combat the spread of coronavirus and faster response of economic growth to additional support measures," OPEC believes.
Commercial oil reserves in the OECD countries exceeded 3 billion barrels in March, which is almost 90 million barrels higher than the average for the past five years, according to OPEC.
"Commercial oil reserves in the OECD countries in March increased by 57.7 million barrels in monthly terms, amounting to 3.002 billion barrels. This is 125.8 million barrels higher than in the same period last year and 88.6 million barrels higher than the average for the past five years," the report notes.
OPEC countries in April 2020 increased oil production by 1.8 million barrels per day (b/d), to 30.4 million b/d. Growth was provided mainly by Saudi Arabia, the UAE, and Kuwait.
Thus, production in Saudi Arabia increased by 2.3 million b/d - to 12 million b/d, according to the indicators transmitted by the country. According to secondary sources (price agencies Platts, Argus), which OPEC relies on, the Kingdom's production increased by 1.56 million b / d to 11.55 million b/d.
In the UAE, production increased by 332 thousand b/d, to 3.84 million b/d. Kuwait also increased the recoverable volumes of raw materials by 259 thousand b/d, to 3.13 million b/d.
Production declined in Angola, Nigeria, Iraq, Iran, and Libya. So, in Iran, production in April decreased by 53 thousand b/d - to 1.97 million b/d, in Venezuela, the decrease was 38 thousand b/d - to 0.62 million b / d. But production fell the most in Angola - by 90 thousand b/d - to 1.3 million b/d.
Intensive production growth in April is associated with the completion of the OPEC+ deal on March 31. The countries renewed their agreements on restrictions only on April 12, and they came into force on May 1. Saudi Arabia said that in April its oil supply increased to 12.3 million b/d, of which 0.3 million b/d was used from storage.
In April, OPEC and Russia agreed on new restrictions. OPEC expects demand for oil from the cartel countries to fall by 5.6 million b/d this year, to 24.3 million b/d.
The new OPEC+ agreement implies a reduction in production by the Alliance countries by 9.7 million b/d during May - June. Russia and Saudi Arabia, according to the agreement, will reduce oil production by equal shares-2.5 million b/d from the base level of 11 million b/d. The agreements will be valid for two years, but from July to December 2020, 7.7 million b/d will already fall under the reduction under the Alliance, and from January 2021 to the end of April 2022 - 5.8 million b/d. The transaction parameters may be revised in December 2021.