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OPEC downgrades forecast for oil demand growth in 2019 and 2020

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VIENNA, AUSTRIA – 2018/06/20: OPEC logo is seen at the Organisation of Petroleum Exporting Countries (OPEC) building in Vienna.
The 174th OPEC meeting will be held on the 22th June 2018 in Vienna. (Photo by Omar Marques/SOPA Images/LightRocket via Getty Images)

SOPA Images | LightRocket | Getty Images

OPEC downwardly revised its forecast for oil demand growth for the second consecutive month on Wednesday, building the case for another round of production cuts from the Middle East-dominated group of producers.

In a closely-watched monthly report, OPEC cut its forecast for global oil demand growth for the remainder of this year to 1.02 million barrels per day (b/d). That’s down 80,000 b/d from its August estimate.

The group, which consists of some of the world’s most powerful oil-producing nations, attributed the downgrade to weaker-than-expected economic data in the first-half of the year and deteriorating growth projections for the remainder of 2019.

In 2020, OPEC said it sees world oil demand increasing by 1.08 million b/d. This represents a downward adjustment of 60,000 b/d from the previous month’s assessment, “mainly to accommodate changes to the world economic outlook.”

The report comes as OPEC and allied non-OPEC partners, sometimes referred to as OPEC+, prepare to meet in Abu Dhabi on Thursday.

The meeting is likely to provide crucial clues about how far some of OPEC’s most powerful players are willing to go to get prices on a firmer footing.

Production cuts

International benchmark Brent crude traded at around $63.09 a barrel Wednesday morning, up around 1.1%, while U.S. West Texas Intermediate (WTI) stood at $58.15, more than 1.2% higher.

The full coalition will gather again in Vienna at the end of the year to decide whether any further action is required for 2020.

OPEC+ is expected to reaffirm its commitment to rebalancing the market at its September 12 meeting, with OPEC kingpin Saudi Arabia poised to double down on its “whatever it takes” message.

Alongside Russia and other allied producers, OPEC agreed to reduce output by 1.2 million barrels a day at the beginning of 2019. That deal replaced a previous round of production cuts that began in January 2017.

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Senators urge U.S. to remove tariffs on EU foods, beverages

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Bottles of French wine are displayed for sale in a liquor store on December 3, 2019 in Arlington, Virginia.

Olivier Douliery | AFP | Getty Images

A bipartisan group of 13 U.S. senators have asked the U.S. Trade Representative’s Office (USTR) to remove 25% tariffs imposed in October 2019 on European Union food, wine and spirits, according to a letter seen by Reuters.

The tariffs, in retaliation for EU subsidies on large aircraft, hit French wine, Italian cheese and single-malt Scotch whisky, as well as cookies, salami, yogurt, olives from France, EU-produced pork sausage and German coffee.

Seven Republican and six Democratic senators, including Robert Menendez, John Barrasso, Cory Gardner, Susan Collins, Dianne Feinstein, Pat Toomey, Kyrsten Sinema and Cory Booker said in a letter to USTR Friday that American “restaurants, retailers, grocers, importers and distributors” are experiencing “severe economic hardship due to the increased cost of goods.”

The senators noted “demand for these goods has declined, leaving importers and distributors with months’ worth of product, much of it perishable, in storage and in transit with no clear end date for the COVID-19 pandemic.”

USTR did not immediately comment.

Last month, Europe’s Airbus said it would increase loan repayments to France and Spain in a “final” bid to reverse U.S. tariffs and jog the United States into settling a 16-year-old dispute over billions of dollars of aircraft subsidies.

The United States last year won World Trade Organization authorization to impose tariffs on up to $7.5 billion of EU goods.

The U.S. Distilled Spirits Council last month urged ending EU and U.S. beverage tariffs, saying drinks firms on both sides of the Atlantic “have suffered enough.”

The group noted Scotch Whisky imports by the United States fell nearly 33% between October 2019 and May 2020, a $378 million decline over the same period a year earlier.

The EU in a separate dispute imposed 25% tariffs  on all U.S. whiskey imports in June 2018. Since then, U.S. whiskey exports to the EU have fallen by 33%, or $300 million, the group said.

Trade groups are bracing for an escalation this autumn when the EU is expected to win WTO approval to retaliate with its own tariffs over subsidies for U.S. planemaker Boeing Co.

USTR announced in June it was considering imposing additional tariffs on products from many EU countries including gin, vodka, beer, sparkling wine and other whiskies.

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After coronavirus, some CEOs plan to prioritize sustainability

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After coronavirus, some CEOs plan to prioritize sustainability