OPEC slashed on Wednesday its global oil demand estimates for this year while cutting its forecast for non-OPEC supply as oil producers outside the OPEC+ pact accelerate production curtailments due to the demand crash, low oil prices, and limited storage capacity.
In its closely watched Monthly Oil Market Report published today, OPEC revised down, again, its global oil demand forecast for this year by a massive 2.23 million barrels per day (bpd), and now sees global oil demand falling by 9.07 million bpd in 2020 compared to 2019.
“Indeed, demand contraction in 2020 can be mitigated with sooner than expected easing of government COVID-19 related measures, and faster response of economic growth to the implemented extraordinary stimulus packages,” the cartel said.
Along with slashing demand projections, OPEC also took an ax to its forecast for non-OPEC supply this year, revising it by nearly 2-million-bpd from last month. Currently, non-OPEC supply is expected to drop by 3.5 million bpd this year, driven by “production shut-ins or curtailment plans announced by oil companies – including the majors – particularly in North America.”
“According to different sources and company announcements, US producers – including oil majors – have so far cut production by at least 1.5 mb/d in 2Q20, which is likely to be achieved by shut-ins of higher-cost wells, partial reductions in output of selected wells and the deferral of ‘putting on production’ wells,’’ OPEC said.
U.S. oil supply this year was further revised down by 1.3 million bpd to now show a decline of 1.4 million bpd in 2020 compared to 2019.
According to OPEC estimates, producers outside of the OPEC+ pact had announced combined cuts of around 3.6 million bpd as of May 6, in response to the lack of demand, low oil prices, excess supply, and limited storage capacity.
“The speedy supply adjustments in addressing the current acute imbalance in the global oil market has already started showing positive response, with rebalancing expected to pick up faster in the coming quarters,” OPEC said.