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The oil market is closing in the near term, but a large surplus is forecast for next year, which will make OPEC's market balance more difficult.
This conclusion came from the latest International Energy Agency (IEA) oil market report, which contained some optimistic conclusions about the health of the world economy, but also some warnings about future problems.
"Trade disputes and growing uncertainties about the impact of a possible exit from the UK of the European Union are reducing global growth by reducing business and consumer confidence by re-evaluating the supply chain, by reducing investment and directly reducing trade, "said the IEA. The price of brent is expected to be around $ 62 per barrel for 2019.
Nevertheless, the IEA has maintained its forecast of demand at 1.1 million barrels per day (Mb / d), which is starting to look too optimistic given a range of downward revisions from analysts elsewhere. The US EIA now claims that demand could only increase by 0.9 Mb / d, the lowest rate in nearly 10 years.
World oil demand increased only 0.5 Mb / d in the first half of the year and less than 0.2 Mb / d in June, according to the IEA. As a result, demand will have to accelerate considerably if we want to reach the annual average of 1.1 Mb / d. The IEA says that with oil prices 20% lower than those of last year at the same time, consumption will increase. In addition, demand in the second half of 2018 was rather weak, so for comparison, the figures for the second half of this year should be larger. Related: the United States briefly overtaken Saudi Arabia in crude oil exports
In addition, the agency also indicates that its estimate is based on no further deterioration in economic and commercial terms.
It's a hope, but in the face of the sign that Washington and Beijing are longing to end the cycle of escalating trade war, China has decided to defer some tariffs on US products this week and President Trump responded in this way a few hours later. , announcing a delay of two weeks on the rate increase scheduled for October. As the Wall Street Journal reports, President Trump has expressed a desire to find a way back on some tariffs after US commercial interests have stepped up an aggressive lobbying campaign last month after the advertised tariffs.
In the end, the IEA predicts an oil supply shortfall of about 0.8 Mb / d in the second half of 2019, due to OPEC + reductions, stronger demand and American slate growth slower than expected.
However, it is "only a sigh," warns the agency. "Although the stocks we've been seeing since the beginning of 2018 have stopped, this is temporary." The American shale has slowed down, but we're still expecting to add 1.25 mb / d this year. figure that could be optimistic). Norway and Brazil record new gains as projects progress.
"Soon, OPEC + producers will once again see oil production rising sharply, with the implicit market equilibrium resulting in a large surplus and price pressure," said L & # 39; IEA in his report. "The challenge of managing the market remains a major challenge well before 2020." Related: oil prices could fall sharply in 2020
The IEA estimates that the non-OPEC supply will increase by 1.9 Mb / d this year before reaching a gain of 2.3 Mb / d next year. This contrasts sharply with growth in demand of only 1.1 Mb / d and 1.3 Mb / d in 2019 and 2020, respectively.
As supply continues to exceed demand, the pressure on OPEC + to further reduce its share will intensify. The IEA predicts that OPEC crude oil demand will be lower by 1.4 Mb / d in 2020 than its output last month.
At the same time, at a follow-up meeting in Abu Dhabi this week, OPEC decided to strengthen compliance with current production cuts, but has refrained from asking for larger discounts . The measure was aimed at getting Iraq and Nigeria to lower their production levels after constantly pumping more than expected. Iraq has announced that it will reduce its production by 175,000 barrels a day in October and Nigeria has agreed to reduce this figure to 57,000 barrels a day. In August, three signatories of the OPEC + agreement – Iraq, Nigeria and Russia – produced 0.6 Mb / d more than had been allocated.
"To ensure market stability, it is imperative that we maintain a high degree of cohesion within OPEC and our OPEC partners," said Prince Abdulaziz bin Salman, the new Saudi minister of Energy, to the Joint Ministerial Monitoring Committee of OPEC in Abu Dhabi.
Oil prices were about to close the week down Friday afternoon.
By Nick Cunningham from Oilprice.com
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