The Bullish Surprise In OPEC's Latest Report

OPEC sees demand for its crude oil at 29.6 million bpd for 2020, which is around 1.1 million bpd lower than the expected average demand for 2019, the organization said in its closely watched Monthly Oil Market Report on Thursday.

This year’s demand for OPEC crude is seen at 30.7 million bpd, or 900,000 bpd lower than demand for OPEC’s oil in 2018.

The expected demand for OPEC crude in 2020 is still 70,000 bpd below the cartel’s overall production for October, so OPEC may have to consider in early December cutting even more production if it has any hope of bringing demand and supply for its oil into balance.

Such as decision, however, may be tough to make because deeper cuts will hand more share of the market to the growing supply of non-OPEC oil, mostly from the United States.

While figures suggest an oversupply in OPEC’s oil demand-supply, the cartel appears to be making a case against deeper cuts as its outlook for next year sounds a bit more bullish than previously decisively pessimistic forecasts.

First, unlike in most of the reports in recent months, OPEC did not revise down global oil demand growth estimates this time. Second, the cartel slightly revised down its estimates for non-OPEC oil supply growth by 36,000 bpd to 2.17 million bpd, mostly due to a 33,000-bpd downward revision for the U.S. American supply growth is now seen at 1.5 million bpd next year.

Finally, commenting on the global economic growth, a key gauge of what to expect from oil demand growth, OPEC said in its report today:

“On a positive note, signs of improving trade relations between the US and China, a potential agreement on Brexit after the UK’s general election, fiscal stimulus in Japan, and a stabilisation of the downward slope in major emerging economies could stabilize growth at the current forecast level.”