At the start of July 2019, OPEC plus Russia decided to continue the agreement struck last year for at least another nine months, and daily production will remain 1.2 m barrels below last October’s level. In response, Brent crude rose to $67 per barrel (bbl) but has since drifted to $63.46 /bbl, a level which is below what many OPEC members require to finance their budgets. For example, the Saudi economy needs oil prices of around $80 a barrel to balance its budget, reports Al Jazeera in July.
OPEC’s July Oil Market Report
OPEC’s July Oil Market Report sees global GDP growth of 3.2 percent continuing into 2020 and world demand rising by 1.4 (million barrels per day (mb/d) year-on-year to around 100 mb/d. At the same time the report sees non OPEC member producers’ output growing by 2.4 mb/d; more than twice as much as global oil demand. U.S. shale oil output reached a record 12 mb/d in April and OPEC‘s report notes that, “U.S. tight crude production is anticipated to continue to grow as new pipelines will allow more Permian crude to flow to U.S. Gulf coast export ports.” Consequently, the report forecasts a decline in demand for OPEC crude of 1.3 mb/d to 29.3 mb/d and a global glut of crude in 2020, implying a further cut of 560,000 barrels per day (bp/d) to maintain prices.