OPEC sees lower 2020 demand for its oil, points to surplus

OPEC and its allies last week renewed a supply-cutting pact until March 2020. (AFP)
Updated 12 July 2019

OPEC sees lower 2020 demand for its oil, points to surplus

  • The drop in demand for OPEC crude highlights the sustained boost that OPEC’s policy to support prices
  • OPEC and its allies last week renewed a supply-cutting pact until March 2020

LONDON: OPEC yesterday forecast world demand for its crude will decline next year as rivals pump more, pointing to the return of a surplus despite an OPEC-led pact to restrain supplies.
The drop in demand for OPEC crude highlights the sustained boost that OPEC’s policy to support prices by supply cuts is giving to US shale and other rival sources. This potentially gives US President Donald Trump more room to keep up sanctions on OPEC members Iran and Venezuela.
Giving its first 2020 forecasts in a monthly report, the Organization of the Petroleum Exporting Countries said the world would need 29.27 million barrels per day (bpd) of crude from its 14 members next year, down 1.34 million bpd from this year.
“US tight crude production is anticipated to continue to grow as new pipelines will allow more Permian crude to flow to the US Gulf Coast export hub,” OPEC said, using another term for shale oil.
In the report OPEC also forecast that world oil demand would rise at the same pace as this year and that the world economy would expand at this year’s pace, despite slower growth in the US and China.
“The 2020 forecast assumes that no further downside risks materialize, particularly that trade-related issues do not escalate further,” OPEC said of the economic outlook. Brexit poses an additional risk, as does a continuation in the current slowdown in manufacturing activity.”
OPEC, Russia and other producers have since Jan. 1 implemented a deal to cut output by 1.2 million bpd. The alliance, known as OPEC+, last week renewed the pact until March 2020 to avoid a build-up of inventories that could hit prices.
Oil pared earlier gains after the report was released, although prices were still trading above $67 a barrel after three Iranian vessels tried to block a British ship in the Strait of Hormuz oil chokepoint.

HIGHLIGHTS

● Demand for OPEC crude to fall 1.34 million bpd in 2020.

● Cites trade disputes, Brexit as economy risks.

● Oil stocks increase, remaining above five-year average. Points to 2020 supply surplus at current OPEC production.

Despite the supply cut, oil has tumbled from April’s 2019 peak above $75, pressured by concerns over the US-China trade dispute and an economic slowdown.
OPEC also oil inventories in developed economies rose in May, suggesting a trend that could raise concern over a possible oil glut.
Stocks in May exceeded the five-year average — a yardstick OPEC watches closely — by 25 million barrels.
OPEC said its oil output in June fell by 68,000 bpd to 29.83 million bpd as US sanctions on Iran boosted the impact of the supply pact.
According to figures OPEC collects from secondary sources, supply from Iran posted the biggest decline, by 142,000 bpd, as Washington tightened the screws on Iranian exports.
Top exporter Saudi Arabia increased output by 126,000 bpd to 9.81 million bpd in June but continued to voluntarily pump less than the supply pact allows it to in order to bolster the market. Nigeria, seeking a higher OPEC quota, posted the group’s largest boost in output.
With 2020 demand for OPEC crude expected to average 29.27 million bpd, OPEC’s report suggests there will be a 2020 supply surplus of over 500,000 bpd if OPEC keeps pumping at June’s rate and other things remain equal.


Tanker off UAE sought by US over Iran sanctions ‘hijacked’

Updated 16 July 2020

Tanker off UAE sought by US over Iran sanctions ‘hijacked’

  • The circumstances of the hijack are still unclear and the boat has been tracked to Iranian waters

DUBAI: An oil tanker sought by the US over allegedly circumventing sanctions on Iran was hijacked on July 5 off the coast of the UAE, a seafarers organization said Wednesday.

Satellite photos showed the vessel in Iranian waters on Tuesday and two of its sailors remained in the Iranian capital.

It wasn’t immediately clear what happened aboard the Dominica-flagged MT Gulf Sky, though its reported hijacking comes after months of tensions between Iran and the US

David Hammond, the CEO of the United Kingdom-based group Human Rights at Sea, said he took a witness statement from the captain of the MT Gulf Sky, confirming the ship had been hijacked.

Hammond said that 26 of the Indian sailors on board had made it back to India, while two remained in Tehran, without elaborating.

“We are delighted to hear that the crew are safe and well, which has been our fundamental concern from the outset,” Hammond told The Associated Press.

Hammond said that he had no other details about the vessel.

TankerTrackers.com, a website tracking the oil trade at sea, said it saw the vessel in satellite photos on Tuesday in Iranian waters off Hormuz Island. 

Hormuz Island, near the port city of Bandar Abbas, is some 190 kilometers (120 miles) north of Khorfakkan, a city on the eastern coast of the United Arab Emirates where the vessel had been for months.

The Emirati government, the US Embassy in Abu Dhabi and the US Navy’s Bahrain-based 5th Fleet did not respond to requests for comment. Iranian state media did not immediately report on the vessel and Iran’s mission to the United Nations did not immediately respond to a request for comment.

In May, the US Justice Department filed criminal charges against two Iranians, accusing them of trying to launder some $12 million to purchase the tanker, at that time named the MT Nautica, through a series of front companies. 

The vessel then took on Iranian oil from Kharg Island to sell abroad, the US government said.

Court documents allege the scheme involved the Quds Force of Iran’s paramilitary Revolutionary Guard, which is its elite expeditionary unit, as well as Iran’s national oil and tanker companies. The two men charged, one of whom also has an Iraqi passport, remain at large.

“Because a US bank froze the funds related to the sale of the vessel, the seller never received payment,” the Justice Department said. “As a result, the seller instituted a civil action in the UAE to recover the vessel.”

That civil action was believed to be still pending, raising questions of how the tanker sailed away from the Emirates after being seized by authorities there.

Data from the MT Gulf Sky’s Automatic Identification System tracker shows it had been turned off around 4:30 a.m. on July 5, according to ship-tracking website MarineTraffic.com. Ships are supposed to keep their AIS trackers on, but Iranian vessels routinely turn theirs off to mask their movements.

Meanwhile, the 28 Indian sailors on board the vessel found themselves stuck on board without pay for months, according to the International Labor Organization. It filed a report saying the vessel and its sailors had been abandoned by its owners since March off Khorfakkan. The ILO did not respond to a request for comment.

As tensions between Iran and the US heated up last year, tankers plying the waters of the Mideast became targets, particularly near the crucial Strait of Hormuz, the Arabian Gulf’s narrow mouth through which 20 percent of all oil passes. Suspected limpet mine attacks the US blamed on Iran targeted several tankers. Iran denied being involved, though it did seize several tankers.