The world’s appetite for oil should remain robust throughout next year even as U.S. production continues to dominate supply growth, the International Energy Agency said Wednesday. In its closely watched monthly oil market report, the IEA laid out for the first time its oil demand forecast for next year, saying it expects demand to grow by 1.4 million barrels a day in 2019, on par with this year. A significant part of that growth will be driven by rising demand for petrochemicals, the agency said. “Together with strong economic growth, the development of the petrochemical industry world-wide will underpin growth in oil demand,” the report said.
But the Paris-based organization, which advises governments and corporations on energy trends, cautioned that risks to its forecast are on the rise. “These include the possibility of higher prices, a weakening of economic confidence, trade protectionism and a potential further strengthening of the U.S. dollar,” the report noted. Meanwhile, the IEA said it expects oil supply growth outside the Organization of the Petroleum Exporting Countries to slow slightly next year, to 1.7 million barrels a day compared with a growth rate of 2 million barrels a day this year. The U.S. “shows by far the biggest gain,” at about 75% of total non-OPEC growth throughout this year and next, the agency said. But the report added that logistical and infrastructure bottlenecks in the U.S. should cap some of the country’s production growth.
The IEA said OPEC production ticked up last month by 50,000 barrels a day, to 31.69 million barrels a day. The gains were mainly driven by production increases in Saudi Arabia, the de facto head of OPEC. In its own monthly oil-market report published on Tuesday, the cartel said its crude oil production climbed by 35,000 barrels a day in May, driven mainly by Saudi Arabia. The upswing in Saudi production comes ahead of a highly anticipated OPEC meeting next week in Vienna. The cartel’s members and other big producers like Russia are expected to discuss easing a coordinated effort to hold back crude output, amid rising prices and geopolitical risks to supply in Venezuela and Iran. OPEC and 10 producers outside the cartel, including Russia, have been cutting crude production by roughly 1.8 million barrels a day since the start of last year, as part of an agreement to rein in a global supply glut that had weighed on prices since late 2014.
The deal helped boost crude prices by more than 40%. But with Brent having temporarily breached $80 a barrel last month, the Saudis and Russians have indicated a willingness to exit from the accord, set to expire at the end of this year, sooner than planned.