OPEC Cuts Forecast On Oil Demand Amid Slowing Global Economy

Global oil industry
Oil pours out of a spout from Edwin Drake's original 1859 well that launched the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. (Photo: REUTERS/Brendan McDermid/File Photo)

The Organization of the Petroleum Exporting Countries (OPEC) on Wednesday downgraded the world's demand growth for oil for the second time to 1.02 million barrels daily amid continued worries for the slowing global economy.

According to CNBC, this is the second consecutive month that OPEC slashed its forecast with an 80,000 barrels per day (b/d) cut from the estimates the organization released last month.

The group said the cut was made after data from the first half of 2019 suggested deteriorating growth in the economy. The results from H1 have largely affected growth projections for H2.

The downgraded forecast also came as OPEC and its members that are not officially allied with the organization prepare for a conference on Thursday in Abu Dhabi. The main agenda of the meeting is expected to focus on what the group and its allies are willing to achieve to push prices up so oil-producing firms can compete with reduced losses.

Saudi Arabia previously hinted that it is willing to go the extra mile and push for "whatever it takes" to get prices on a more stable footing. International oil production companies are already getting anxious and investors have raised worries about the oil industry's future.

As part of the efforts in improving the global oil sector, OPEC members, Russia, and other allied countries, agreed to cut down on production earlier this year. It remains to be seen if upcoming production cuts will be announced amid increased economic uncertainties.

On Wednesday's early trading, oil prices saw a boost following a sharp decline in U.S. crude shares. According to Reuters, West Texas Intermediate futures gained 1.4 percent at $58.21 per barrel and Brent futures edged up 1.25 percent to finish at $63.12 per barrel.

The hike in oil prices came after it was revealed a day earlier that U.S. crude stocks dropped dramatically last week, accounting for a decline of 7.2 million barrels. The American Petroleum Institute (API) also said gasoline shares went down, making markets react to the news.

Meanwhile, the oil industry has its eyes on Saudi Aramco, as the oil giant prepares for its long-anticipated initial public offering (IPO). The company recently chose a new chairman as Aramco gets closer to its IPO dream.

According to CNN, the administrative shakeup, as well as the rush to get the IPO process completed, is all part of Saudi Arabian Crown Prince Mohammed bin Salman's ambitions of diversifying the country's economic prowess.

Saudi Aramco is considered the world's most profitable firm and the Crown Prince said he hopes to have the company valued at $2 trillion, but some analysts said the valuation may sit somewhere around $1.5 trillion.

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