However, reports of a possible arrangement between Washington and Riyadh appear to be fueling a rift between OPEC members that want to keep the deal in place and those who want to consider raising output.
On Monday, Iraq’s oil minister Jabbar al-Luaibi said unilateral decisions by some OPEC members risks violating the production-cutting agreement, which is scheduled to last through the end of the year and includes non-members like Russia.
Iraq, along with Iran and Venezuela, have voiced support for maintaining the supply caps, which have boosted oil prices. The three nations risk losing market share because they currently lack spare capacity and would not benefit from a decision to ease the quotas.
On Tuesday, OPEC said recent developments have created “pronounced uncertainty about the second half of the year.”
According to OPEC “the re-emergence of global trade barriers, continued growing debt levels and potentially rising volatility in asset markets amid ongoing monetary tightening, are some of the challenges that may negatively impact the 2H18 growth dynamic.”
OPEC raised its forecast for oil supply growth from non-members by 130,000 for 2018. It now expects countries outside OPEC to pump 1.86 million barrels a day above 2017 level. That means the world will need 300,000 fewer barrels per day from OPEC this year, the group projects.
Meanwhile, OPEC left its outlook for global oil demand unchanged at 98.85 million barrels per day, up 1.65 million barrels a day from last year. The group warned there may be limited scope for demand to exceed expectations.
“While oil demand in the US, China and India shows some upside potential, downside risks might limit this potential going forward, including a slowdown in the pace of economic growth in some major economies, stronger impact of policy reform with regard to retail prices, and further substitution toward natural gas.”
In April, oil stockpiles in developed nations were 26 million barrels below their five-year average, the level OPEC targeted when it agreed to cut output. However, the group added a caveat, noting that inventories are still 240 million barrels above the start of 2014, the year oil prices crashed.