Crude prices in the global oil market is driven more by overall demand rather than supply, according to the Secretary General of the Organization of Petroleum Exporting Countries (OPEC) on Tuesday.
“What we believe is currently driving the market it has more to do with the demand side of the equation and not the supply," Mohammed Barkindo said during the third India Energy Forum by CERAWeek held in New Delhi.
"Supply is well constrained, both in OPEC and non-OPEC groups," he added, referring to the production cut of 1.2 million barrels per day (bpd) that the organization and its allies agreed to make in December 2018 and later extended this to the end of March 2020.
On the supply side, the U.S., world's largest oil producer, saw its crude output climb to a record high level of 12.6 million bpd for the week ending Oct. 4, according to the Energy Information Administration (EIA) data.
However, Barkindo said "We have also been seeing deceleration in growth in North America, especially in the shale basins of the U.S."
The EIA data show that the previous all-time highest levels in crude output were recorded six weeks before last week on Aug. 23 with 12.5 million bpd, and four months before that on April 26 with 12.3 million bpd.
On the demand side, Barkindo said the trade conflict between the U.S. and China continue to have a negative impact on the global economy.
"As a result of that the financial markets that have come to play an increasing role in the evolution of prices is seen to take a bearish view of the continuous growth of the economy, and by extension, demand," he said.
"Therefore, you can see we have become more cautious in our projections of demand for both 2019 and 2020," he added.
OPEC lowered its global economic growth forecast for 2020 to 3% from its previous estimate of 3.1%, according to its Monthly Oil Market Report released on Oct. 10.
"... it seems increasingly likely that the slowing growth momentum in the U.S. will carry over into 2020, while ongoing uncertainties surrounding the EU, including Brexit, will remain," the report said.
"Moreover, rising U.S. tariffs on EU imports and ongoing U.S.-China trade issues are dampening growth momentum," it added.
By Ovunc Kutlu