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The increase in pipeline capacity in the Permian and the weakest oil demand growth of the last decade is expected to result in increased volatility in oil prices in the near term, said an energy expert, joining a growing number of analysts who see prices even more depressed by slowing economies and gross demand.
"The bottlenecks of the pipelines are being solved, so a lot more oil is going to come into the market by the end of the year. We expect crude oil production in the United States to reach 13 million barrels a day, "IHS Markit Vice President Daniel Yergin told CNBC.
While US production will continue to increase supply in an already saturated world market on the demand side, expectations are becoming more and more pessimistic.
"We are in one of the weakest periods since 2008 and we believe that demand growth this year is less than one million barrels a day. So you have this factor at the same time that you have more oil coming into the market. So, expect some volatility, "Yergin told CNBC during an interview on the sidelines of a conference in Abu Dhabi.
Despite expectations of volatility, IHS Vice President Markit estimates that Brent crude prices are in the range of 55 to 65 USD.
Yergin is not alone in predicting much slower growth in oil demand than originally forecast.
The International Energy Agency (IEA) has revised downward its demand growth forecast for 2019 in its latest oil market report, from 100,000 barrels per day to 1.1 million barrels a day, after finding that between January and May, demand growth was only 520,000 barrels a day, the smallest increase in the period. since 2008.
Several Wall Street investment banks have already warned that the escalation of the US-China trade war increased the chances of an economic slowdown and, as a result, weak growth in oil demand . Some banks have already cut their estimates of oil demand growth for this year, saying oil demand could grow at its slowest pace for at least five years.
In July, Barclays lowered its oil price forecast for the second half of 2019, saying growth in demand would be a little over a million bpd this year. Barclays downgraded its Brent crude forecast from $ 2 to $ 69 per barrel and WTI crude to $ 61 per barrel.
In August, Morgan Stanley said demand growth continued to slow despite slowing economic growth and reduce its forecast for the third and fourth quarters of 2019 for Brent crude from $ 60 to $ 60 per barrel. $ 58 per barrel for WTI crude oil at $ 55.
This week, Goldman Sachs downgraded its estimate of oil demand growth to 1 million bpd, a decrease of 100,000 bpd from previous forecasts. Related: A new era for Saudi oil
"Our forecast of oil supply and demand for 2020 calls for a further reduction in OPEC production in order to keep inventories normal," Goldman analysts said in a published note. by Reuters.
In its short-term energy outlook (STEO) released on Tuesday, the EIA also reduced its estimate of global demand growth for 2019 to 900,000 b / d, a decrease of 100,000 b / d from the previous year. to the August forecast.
"If it materializes, 2019 would be the first year in which demand growth has been less than 1.0 million b / d since 2011," said EIA, which lowered the forecast by $ 63. August for Brent crude of $ 2. For 2020, EIA expects annual average Brent crude prices to fall slightly to $ 62 per barrel, a decline of $ 3 per barrel on the forecast for the first quarter. 39; August.
It is not only demand that will weigh on oil prices for the rest of the year; supply from the United States is expected to increase with reduced buying constraints from the Permian to the US Gulf Coast. The Cactus II crude oil pipeline added about 670,000 barrels a day and the EPIC Midstream natural gas liquids pipeline, which was reallocated for crude oil, added an additional capacity of 400,000 barrels a day, EIA said. .
Thanks to Cactus II and EPIC, crude oil shipments from Corpus Christi hit a record high in the first week of September, RBN Energy said Monday, noting that the data could "suggest that the expected rise in oil exports Permian is finally happening. "
If the increase in export volumes continues to increase in the coming weeks, the Corpus crude oil export infrastructure could finally benefit from doubt, "said RBN Energy.
Yet, more and more analysts believe that shale production growth in the United States will slow significantly for the rest of the year, raising hopes that worries over global oversupply may be exaggerated.
Supply and demand problems and the unpredictable nature of the ongoing trade war between the United States and China set oil prices for a long period of volatility.
By Tsvetana Paraskova for Oilprice.com
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