OPEC sees slower 2019 oil demand growth, warns on economy

Ivan Schwartz
September 16, 2018

US light crude settled down $1.78, or 2.5 per cent, at $68.59 a barrel.

Benchmark Brent crude was marginally higher at $79.08 a barrel after touching as high as $79.66 earlier in the day, the highest since late May, when the price broke above $80 a barrel.

In addition, OPEC's production also is rising.

USA sanctions on Iran's energy industry, which come into force in November, have already cut supply back to two-year lows, while falling Venezuelan output and unplanned outages elsewhere will also keep the balance between supply and demand tight, the IEA said.

Crude briefly pared gains after the OPEC report was released but later rallied to trade above United States dollars 80 a barrel, a level reached earlier this year for the first time since 2014, supported by expectations for a further drop in Iranian exports.

The issue of additional U.S. sanctions that are being imposed on Iran was again a major subject of market attention, with Russian Energy Minister Alexander Novak warning of the impact that the the USA action could have on Iranian oil sales.

The Paris-based energy agency said falling output in Iran and Venezuela could drive up prices if it is not offset by more production elsewhere.

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OPEC and its allies are in constant contact on production, Russian Energy Minister Alexander Novak said.

The double whammy of a significant fall in Iranian crude exports owing to the United States strictures and a drastic dip in output in Venezuela due to its economic crisis is leaving global crude prices on a high.

US production has returned to 2014 boom levels, but the energy agency said USA output will grow more slowly next year due to bottlenecks in getting oil to markets. Higher volumes from Nigeria and Saudi Arabia as well as increased production in Libya and Iraq served to outweigh these drops.

Distillate stockpiles, which include diesel and heating oil, rose by 6.2 million barrels, versus expectations for a 1.4 million-barrel increase, the EIA data showed.

OPEC said the world will need 32.05 million bpd from its 15 members in 2019, unchanged from last month.

The EIA's most recent monthly export data shows the USA exported 3.609 million barrels of ethanol in June, primarily to Brazil, Canada and India.

"We can see that the pricing situation today depends not just on the supply/demand balance or the general economic situation but also on the uncertainty that we observe today in the global markets: the trade wars, the sanctions that the USA pursues", Novak told CNBC.

Other reports by GizPress

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