The Organization of Petroleum Exporting Countries, OPEC, on Tuesday predicted that world demand for its oil would be higher than expected this year as supply growth from rivals including U.S. shale producers slows, pointing to a tighter market if the exporter group refrains from raising output.
But the Organization, in a monthly report, said its output fell slightly in April as U.S. sanctions on Iran added to the impact of an OPEC-led supply-cutting pact.
Supply losses in OPEC members Iran and Venezuela, both under U.S. sanctions, have deepened the impact of the production-limiting deal. The so-called OPEC+ group of producers meets next month to review whether to maintain the pact beyond June.
Vienna-based OPEC trimmed its estimate of oil supply growth from outside the group in 2019 and said the rapid rise in production of U.S. tight oil, another term for shale, was moderating.
“Supply growth is likely to be slower than last year amid the expected weaker global economic growth,” OPEC said.
“U.S. tight oil production is increasingly faced with costly logistical constraints in terms of out-take capacity from land-locked production sites.”
OPEC, Russia and other non-member producers are reducing output by 1.2 million barrels per day from Jan. 1 for six months. The producers will meet on June 25-26 to decide whether to extend the pact.
The OPEC+ returned to output cuts this year due to concern that an economic slowdown would produce a supply glut. But demand has weakened no further for now, as OPEC kept its estimate of global growth in oil use in 2019 steady at 1.21 million bpd.
However, in a development that may raise OPEC concern, the report said inventories in developed economies rose in March, after falling in February.