The global oil market could move into deficit sooner than expected thanks to OPEC’s output agreement with Russia and to Canada’s decision to cut supply, the International Energy Agency said on Thursday.
The Paris-based IEA kept its 2019 forecast for global oil demand growth at 1.4 million barrels per day, unchanged from its projection last month, and said it expected growth of 1.3 million bpd this year.
Uncertainty over the global economy stemming from U.S.-China trade tensions could undermine oil consumption next year, as growth in supply gathers pace.
“For 2019, our demand growth outlook remains at 1.4 million bpd even though oil prices have fallen back considerably since the early October peak,” the IEA said.
“Some of the support provided by lower prices will be offset by weaker economic growth globally, and particularly in some emerging economies.”
The Organization of the Petroleum Exporting Countries agreed last week with Russia, Oman and other producers to cut oil output by 1.2 million bpd from January to stem a build-up in unused inventories of fuel.
The decision by the government of Canada’s Alberta province to force oil producers to curtail supply will bring the largest reduction to crude output next year, the IEA said.
Alberta crude and oil sands output will drop by 325,000 bpd from January to force down vast inventories that built up because of pipeline capacity constraints.
The oil price has fallen by nearly a third so far this quarter to around $61 a barrel, from a four-year peak close to $87 in early October.
In its previous report in November, the IEA said it expected the global oil market to remain in surplus throughout 2019. Now, it expects a deficit to materialize by the second quarter of next year, provided OPEC sticks to its supply deal.
“Time will tell how effective the new production agreement will be in rebalancing the oil market,” the IEA said.
Part of the oil-price weakness in the second half of this year stems from concern about how much an economic slowdown could eat into demand growth.
The International Monetary Fund and the Organisation for Economic Cooperation and Development expect the global economy to expand more slowly next year than forecast six months ago.
The OECD in November projected that world economic growth would slow to 3.5 per cent in 2019 from 3.8 per cent this year.
“Uncertainty about trade tensions and tighter monetary policies continue to affect confidence and investment.
“The OECD’s lower expectation for the world economy in 2019 could reduce oil demand growth by roughly 100,000 bpd,” the IEA said.