Ayobami Adedinni
The re-emergence of global trade barriers, continued growing debt levels and potentially rising volatility in asset markets amid ongoing monetary tightening, are some of the challenges that may negatively impact the remaining part of 2018 growth dynamic, a new report by the Organisation of Petroleum Exporting Countries, (OPEC) has said.
In its “June 2018 Monthly Oil Market Report”, released Tuesday and obtained by business a.m., the cartel said Non-OPEC supply growth is forecast to show further upside potential for the rest of the year, due to higher drilling activity in the US, more new project start-ups in Brazil and possibly higher output following the end of heavy maintenance at upgrading facilities in Canada.
According to the report, demand for OPEC crude in H2, 2018 is projected at 33.3 mb/d, down by 0.5 mb/d from 2H17.
Turning to the oil market, global oil demand growth is anticipated at 1.61 mb/d y-o-y, with total oil consumption projected to surpass the 100 mb/d threshold during Q4, 2018.
It said, “In 2H18, OECD countries are projected to sustain the positive momentum with most of the growth seen in OECD Americas, mainly supported by a healthy US economy.
“OECD Europe is forecast to continue to show steady oil demand growth, largely driven by middle distillates. Non-OECD countries are again projected to lead oil demand growth with 1.28 mb/d y-o-y in 2H18.
OPEC said the oil market outlook in the second half of the year is highly uncertain suggesting exporters will be in no rush to fully relax output curbs at its meeting next week.
It said, “Recent developments in the oil market have led to pronounced uncertainty about the second half of the year.
“Year-to-date (y-t-d) at the end of May, crude oil prices are 30 percent higher than in the same period last year, with ICE Brent averaging above $70/b for the first time since 2014,” the report stated.
Draws in crude oil inventories, healthy oil demand and geo-political developments have supported this rising trend.
Recently, crude oil futures have lost some momentum amid uncertainty as traders prepare for potentially more supply returning to the market.
Moreover, Japan and the Euro-zone are projected to accelerate in 2H18, following a slow start to the year. While the OECD shows upside potential, the major emerging economies will likely slow from relatively higher activity in 1H18.
China is expected to continue financial tightening, which combined with monetary measures in the US, could dampen growth in 2H18. India is also forecast to show lower growth in the second half of the year, after a strong recovery during 1H18.
Brazil and Russia are projected to remain stable in 2H18, subject to short-term commodity prices and political developments.
Meanwhile, non-OPEC oil supply in 2H18 is anticipated to increase by 2.0 mb/d y-o-y. The US is the main driver, contributing 1.4 mb/d to growth, followed by Canada and Brazil.
