World oil stockpiles and supplies are plenty, according to the latest OPEC monthly report, despite the loss of more than two million barrels per day of Iranian oil exports.
OPEC downgraded its estimate of world economic growth in 2020 from 3.2 to 3.1 percent, which led to lower expectation for global oil demand. US-China trade tensions and Brexit are major reasons for OPEC’s less than optimistic outlook.
Oil prices hover around $63 a barrel compared with $75 in April, despite OPEC-led cut in production. The oil producers’ cartel plus Russia have instituted production limits since 2017, but a substantial increase in U.S. shale output has kept supplies high.
Iran’s exports of 2.5 million barrels in early 2018 have largely disappeared from the market due to stringent U.S. sanctions, but OPEC still limits production to keep prices at current levels. Venezuela is also under U.S. oil export sanctions, but OPEC members have to abide by their collective output cuts.
In addition to lackluster demand and plenty of supplies, demand for OPEC oil will decline by 1.2 million barrels a day to 29.4 million, the monthly report says. It also suggests next year there will be a larger daily surplus of oil production.
"This highlights the shared responsibility of all producing countries to support oil market stability to avoid unwanted volatility and a potential relapse into market imbalance," the report said.