Opec faces challenging year ahead amid rising supply, IEA says

The Opec, non-Opec pact is expected to hold until March 2020

Opec production is likely to slump 7 per cent by 2024, the group said in its annual outlook. Reuters

The International Energy Agency said Opec faced a challenging year ahead as it revised upwards its supply growth forecast from countries outside the group.

Non-Opec supply is forecast to increase by 2.3 million barrels per day in 2020 from 1.8 million bpd this year, taking the total anticipated output from these countries to 67.1 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,” the Paris-based agency said on Friday.

Opec and allies outside the group, led by Russia, have been cutting back 1.2 million bpd of crude from the markets since the beginning of January, with the output restriction pact expected to hold until March 2020. The efforts have not helped reverse the bearishness seen in the oil markets this year, which have remained tepid due to slowing global growth as well as the ongoing US-China trade war, which have impacted demand.

Opec remains optimistic about prospects for a 'phase one' trade deal between the US and China and has dismissed concerns about US shale squeezing out its market share.

Opec sees a significant upswing in oil demand growth for next year, its secretary-general Mohammed Barkindo told reporters in Abu Dhabi last week.

“Yes there is that potential at the moment because the numbers that we’re reviewing in non-Opec supply are not likely to materialise," he said.

Production of crude and other liquids is set to decline by 7 per cent to 32.8 million bpd by 2024, compared with 35 million bpd for this year, Opec said in its annual World Oil Outlook.

Brent was down 0.53 per cent and was trading at $61.95 per barrel at 5pm UAE time, while West Texas Intermediate was down 0.14 per cent at $56.69 per barrel.