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Demand for Opec crude to drop in 2020

Report also forecast that world oil demand would rise at the same pace as this year

Opec expects demand for its crude to drop next year, while rivals can expect growth, according to the cartel's monthly outlook.

In its July report, Opec said the global market would need 29.27 million barrels per day of crude from its 14 members in 2020, down 1.34 million bpd from this year.

Opec also forecast that world oil demand would rise at the same pace as this year and that the global 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 materialise, particularly that trade-related issues do not escalate further,” Opec said.

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“Brexit poses an additional risk, as does a continuation in the current slowdown in manufacturing activity,” it added.

Opec, Russia and other producers have since 1 January 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.

Opec’s 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.

Meanwhile, non-Opec oil supply is forecast to grow by 2.4 million bpd in 2020, higher than in the current year.

“This is mainly due to the debottlenecking of oil infrastructure in North America and new project ramp ups in Brazil, Norway and Australia. In contrast, natural decline in Mexico, Indonesia, Colombia and Egypt is foreseen to offset some of this growth,” according to the report.

In addition, 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.

“More than 2.5 million bpd of new pipeline capacity in the Permian is expected to become operational by July 2020,” according to the report.

“Investment by exploration and production (E&P) companies in the US is expected to reach around $180 billion next year, with the tight oil sector forecast to spend some $124 billion,” Opec said.

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