LONDON (ICIS)–Global crude demand is expected to rally slightly from the sluggish level seen so far in 2019 in the second half of the year, with projected stronger demand from the Americas expected to offset contracting consumption in Europe and the Asia-Pacific region, OPEC said on Thursday.
Demand growth in the closing six months of 2019 is expected to average 1.2m bbl/day despite economic weakness in Europe and expected lower petrochemicals feedstock demand in organisation of economic co-operation and development (OECD) Asia during the period.
Stalling petrochemicals activity in South Korea in March weighed on naphtha and liquefied petroleum gas (LPG) demand in the country.
In contrast, China petrochemicals feedstock demand is expected to improve in the second half of the year, OPEC said in its monthly oil market report.
Geopolitical tensions continued to weigh on market appetite as non-OPEC supply continued to grow. Crude futures prices fell sharply at the close of May to the lowest point since February. Brent crude pricing fell by more $7/bbl while US grade WTI dropped $10/bbl, while volatility increased over the same period as uncertainty grew over foundering economic growth.
“Weakening refining margins, a subdued performance by oil products, consecutive weeks of rising US crude oil inventories, and sustained historically high levels of US oil supply also weighed on prices,” OPEC said in the report.
OPEC members are expected to meet in the near future, and will be discussing how best to respond to ongoing economic weakness, geopolitical tensions and strong oil supplies despite production cuts by many cartel members.
“While growth in non-OPEC supply continues, the extent of additional production in key regions in 2H19 will mainly depend on volumes of start- and ramp-ups,” OPEC said.
“The upcoming OPEC and non-OPEC ministerial meetings will carefully consider these developments, in order to ensure continued market stability,” it added.
Despite the volatility of oil pricing over the last 18 months, OPEC has been an important factor in reducing the impact of fluctuations, according to BP.
OPEC’s crude output fell by around 236,000 bbl/day on average month on month in May, driven primarily by a drop in Iranian crude output following the expiration of sanctions waivers issued by the US government allowing certain countries to continue purchasing oil from the country.
Production in crisis-hit Venezuela stabilised during the month, at around 741,000 bbl/day, based on secondary estimates.
The projected second-half rebound is insufficient to prevent a downgrade to 2019 oil demand growth forecasts, which OPEC cut by 70,000 bbl/day to 1.14m bbl/day. Non-OPEC supply growth expectations were unchanged month on month despite expectations of weaker output from the US, Norway and Brazil at 2.14m bbl/day.
US oil crude supplies grew nearly 16% year on year in 2018 to an average of 16.66m bbl/day, or over 17m bbl/day in the second half of the year.
The country is expected to keep expanding its crude output at double-figure percentage point levels this year compared to 2018, with an average of 18.5m bbl/day for the year, ratcheting up to 19.45m bbl/day in the fourth quarter, according to OPEC forecasts.
Energy sector analysis from BP this week revealed that the US’s increases in output of oil and gas were the most substantial respective single-year rises for any country since the oil and gas firm started to compile the data nearly 70 years ago.