OPEC revises down forecasts for world oil demand growth

OPEC revises down forecasts for world oil demand growth

US bank Morgan Stanley said the surge in USA crude oil production, which tends to be light in quality and which rose by more than 2 million barrels per day (bpd) past year to a record 11.9 million bpd, had resulted in overproduction of gasoline.

Before U.S. sanctions came into force at the end of January, Washington shipped large amounts of naphtha to Venezuela.

Sechin said in the letter that the supply cuts with OPEC play into the hands of the USA, which has emerged as the world's largest oil producer.

The latest forecasts from supply-and-demand studies of the oil industry's most-watched organizations - the International Energy Agency, the U.S. Energy Information Administration, and the Organization of Petroleum Exporting Countries itself - show the need for OPEC crude diminishing as demand forecasts are trimmed and U.S. supply outlooks are increased.

The demand for the past year has been adjusted downwards.

But there are indications that crude supply is beginning to decrease.

Looking forward, oil could continue to rise, courtesy of falling OPEC and Venezuelan supplies.

What has driven the fall in the need for OPEC crude? With the prospect of an ever-increasingly energy independent US coming closer to fruition, current energy products will have to cut output in order to keep prices at a suitably high level.

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The IEA kept forecasts for global oil demand unchanged, despite signs of slowing economic growth, as consumption remains supported by lower crude prices and the startup of petrochemical projects in China and the U.S. The group made a strong start to the strategy, slashing output by 930,000 barrels a day to the lowest in nearly four years, the IEA said.

Since plummeting more than 40 percent between early October and late December a year ago, Brent crude has gradually pared some of its losses.

Overall, global supply fell by 1.4 mbd to 99.7 mbd in January, according to the IEA, which said cuts imposed by authorities in the province of Alberta in Canada, which is not party to the Vienna Agreement, also contributed to the reduction.

WTI prices were also weighed down by the closure of a 120,000 barrels per day (bpd) crude distillation unit (CDU) at Phillips 66's Wood River, Illinois, refinery following a fire on Sunday.

Venezuela's production has nearly halved in two years to 1.17 million bpd, as an economic crisis decimated its energy industry and USA sanctions have now crippled its exports. But a shortfall of heavy-sour crude can cause complications for many refiners, such as those along the U.S. Gulf Coast, configured to process it. This follows from the figures published by OPEC on Tuesday.

The so-called OPEC+ deal has been in place since 2017, aimed at reining in a global supply overhang.

Note: Julian Lee is an oil strategist who writes for Bloomberg.

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