Oil an­a­lysts ex­pect mod­est price gains in 2020

The Punch - - ENERGY -

OIL prices are likely to hover around $63 per bar­rel next year, a Reuters poll showed, ben­e­fit­ing from deeper pro­duc­tion cuts by the Or­gan­i­sa­tion of Petroleum ex­port­ing Coun­tries and its al­lies, and hopes that a Us-china trade deal could jump­start eco­nomic growth.

The in­ter­na­tional oil bench­mark, Brent crude, is fore­cast to av­er­age $63.07 per bar­rel in 2020, up marginally from last month’s $62.50 es­ti­mate, a sur­vey of 38 econ­o­mists and an­a­lysts showed.

Brent prices have gained about 24 per cent in 2019 so far, con­tin­u­ing its mod­est re­cov­ery on the back of sup­ply cuts by OPEC and al­lies like Rus­sia.

The group ear­lier this month agreed to deepen sup­ply cuts from 1.2 mil­lion bar­rels per day to 1.7 mbpd for the first quar­ter of 2020.

“To­gether with our ex­pec­ta­tion of slow­ing U.S. sup­ply growth, we think that OPEC’S de­ci­sion to deepen pro­duc­tion cuts will tip the oil mar­ket into a deficit early next year,” said Alexan­der Kozul-wright from Cap­i­tal eco­nom­ics.

The In­ter­na­tional en­ergy Agency sees to­tal US oil pro­duc­tion growth slip­ping to 1.1 mbpd in 2020 from 1.6 mbpd this year.

The rate of US out­put growth has been de­clin­ing as pro­duc­ers re­duced the num­ber of oil rigs op­er­at­ing for a fourth quar­ter in a row for the first time since 1999.

U.S. WTI crude fu­tures are fore­cast to av­er­age $57.70 per bar­rel next year, up from last month’s fore­cast of $57.30.

De­mand is pro­jected to grow by 0.9-1.4 mbpd in 2020 as signs of de­tente in the Us-china trade war gave a glim­mer of op­ti­mism for the ail­ing global econ­omy.

The In­ter­na­tional Mar­itime Or­ga­ni­za­tion’s new reg­u­la­tions favour­ing low-sul­phur fuel oil ef­fec­tive Jan. 1, 2020 will be an­other dom­i­nant fac­tor driv­ing de­mand growth next year, an­a­lysts noted.

“The global growth re­bound story should do won­ders for oil prices in the first half of the year. Over­sup­ply con­cerns will re­main, but a pick-up in de­mand will al­le­vi­ate strong in­creases in pro­duc­tion from Nor­way, Brazil and Guyana,” said ed­ward Moya, se­nior mar­ket an­a­lyst at OANDA.

While most re­spon­dents are op­ti­mistic about oil prices in the near term, none of the an­a­lysts polled ex­pect bench­mark Brent prices to rise above the 2019 high of $75.60 hit in April.

“The big question on the sup­ply side is: Will OPEC re­ally stick to the lat­est deal and cut pro­duc­tion as the level of OPEC out­put al­ready is very low,” said LBBW an­a­lyst Frank Schal­len­berger.

OPEC and its pro­ducer al­lies have been cap­ping their col­lec­tive out­put since 2017 and Rus­sian en­ergy Min­is­ter Alexan­der No­vak on Fri­day said the OPEC+ na­tions might con­sider end­ing their oil out­put curbs in 2020.

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