Independent energy research and business intelligence company Rystad Energy on Friday (6 September) forecasted three essential factors determining the direction of the oil price next year.
It highlighted a balanced oil market in 2020 will be dependent on three pillars:
“Markets can balance with an extension of OPEC cuts through 2020, as we believe the IMO 2020 regulations will create more demand for crude oil,” said Bjørnar Tonhaugen, head of oil market research at Rystad Energy.
“Moreover, the global economy needs to avoid a sharp slowdown and oil demand recover to more normal growth rates of between 1 million and 1.2 million barrels per day.
“If the stars fail to align, however, OPEC may need to discuss much deeper cuts to support the market.”
According to Rystad Energy, the latest Oil Market Balances Report finds the market being able to come into balance in 2020, even at current oil prices, as latest revisions suggest a call-on-OPEC crude oil reaching 30.1 million barrels per day (bpd) next year, compared to 29.5 million barrels per day in last month’s report.
However, a balanced market next year also implies that the global economy does not enter a technical recession and that demand recovers to around 1.2 million bpd growth.
OPEC will need to maintain current production levels, with extended cuts through at least 2020, while the introduction of stricter shipping fuel regulations – the so-called IMO 2020 effect – will cause a net positive effect on crude demand growth next year of about 1.0 million bpd in order to balance the global gasoil market.
“Without the expected additional crude runs in 2020, on top of the normal growth in refinery runs to keep up with overall products demand without IMO 2020, prices will be even lower next year – unless OPEC cuts its production to around 29 million bpd in 2020,” states Tonhaugen.
As such, Rystad Energy forecasts that crude oil and lease condensate production growth outside of OPEC and Russia will reach 2 million bpd in 2020, down 0.2 million bpd from the previous estimate.
The US oil supply forecast for December 2020 has been revised down by 0.5 million bpd to 14.0 million bpd, which represents a yearly addition of 1.15 million bpd, according to the independent energy research firm.
Photo credit: Rystad Energy
Published: 10 September, 2019
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