Strong oil supply growth from non-OPEC countries puts a lot of pressure on OPEC and its Russia-led partners to act, and they will hopefully make the right decision for themselves and for the still ‘very fragile’ global economy, Fatih Birol, the Executive Director of the International Energy Agency (IEA), told Reuters in an interview on Tuesday.
OPEC and its non-OPEC allies are meeting in Vienna next week to discuss the state of the global oil market and the fate of their production cut deal. The meeting comes as global oil demand growth has slowed down this year amid weakening economic growth and the continued trade spat between the two biggest economies in the world, the United States and China.
The meeting is expected to decide how the OPEC+ group of partners will proceed with the production cuts that are currently in place until March 2020. The market expects the group to come up with a decision next week—either to roll over the cuts, or to deepen them, otherwise analysts expect a sell-off in oil.
Next year, oil demand growth is expected to pick up from this year’s lower growth pace, but oil supply from producers not part of the OPEC+ coalition—such as the United States, Brazil, and Norway—is seen growing faster than the rise in demand, and offsetting efforts of the cartel and its allies to rebalance the market.
“There will be lots of oil in the markets. I hope they will make the right decision for themselves and for the global economy, which is still very fragile,” IEA’s Birol told Reuters today.
The head of the international agency acknowledged that U.S. oil supply growth is set to slow down, but nevertheless, the United States will keep pumping more oil than in previous years.
The IEA sees non-OPEC countries adding another 2.3 million bpd to their supply in 2020, while global oil demand growth is expected at 1.2 million bpd.
“The hefty supply cushion that is likely to build up during the first half of next year will offer cold comfort to OPEC+ ministers gathering in Vienna at the start of next month. However, a continuously well-supplied market will lend support to a fragile global economy,” the IEA said in its latest Oil Market Report on November 15.
By Tsvetana Paraskova for Oilprice.com