FXEMPIRE
All

Oil Price Fundamental Daily Forecast – IEA Sees Oversupplied Market, OPEC Forecasts Deficit

OPEC and the IEA appear to be at odds about supply in 2020, however, the focus for investors at this time is really on future demand growth. Helping to generate concerns about demand growth is the lingering battle between the world’s two biggest economies – the U.S. and China.
James Hyerczyk
Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Thursday shortly before the regular session opening. The catalyst behind the rally is a forecast from OPEC calling for a supply deficit next year. This potentially bullish news somewhat offsets this week’s surprise inventory builds reported by the American Petroleum Institute and U.S. Energy Information Administration.

At 10:52 GMT, February WTI crude oil is trading $59.00, up $0.35 or +0.60% and February Brent crude oil is at $64.33, up $0.61 or +0.96%.

Before you get too excited about crude oil’s upside potential, the International Energy Agency (IEA) followed up the OPEC news by saying global oil inventories could rise sharply despite an agreement by OPEC and its allies to deepen output cuts as well as lower expected production by the U.S. and other non-OPEC countries.

International Energy Agency Forecast

CNBC reported:

“Despite the additional curbs…and a reduction in our forecast of 2020 non-OPEC supply growth to 2.1 million barrels per day (bpd), global oil inventories could build by 700,000 bpd in Q1 2020,” the Paris-based IEA said in a monthly report.

OPEC, led by de facto Saudi Arabia, and other producers including Russia agreed last week to rein in output by an extra 500,000 bpd in the first quarter of 2020 in order to balance the market and buoy prices, but stopped short of pledging action beyond March.

Even if the group adhered strictly to the new pact and output from members beset by political troubles like Iran and Venezuela stayed steady, the IEA said only 530,000 bpd of crude would be withdrawn from the market compared to November production.

The IEA revised down its forecast for supply growth by non-OPEC countries in 2020 by 200,000 bpd “on a continued slowdown in the U.S., reduced expectations for Brazil and Ghana as well as additional cuts by OPEC’s allies”.

The biggest reduction is expected to be in U.S. shale output, where operators have been cutting spending under investor pressure to improve returns.

The IEA estimates total U.S. oil production growth will slow to 1.1 million bpd in 2020 from 1.6 million bpd this year.

OPEC Revises Forecast on Balance Next Year

OPEC on Wednesday said it now expected a small deficit in the oil market in the next year, suggesting the market is tighter than previously thought – even before the latest pact with other producers to curb supply takes effect.

The revised forecast by OPEC marks a further retreat from a prediction of a glut in 2020 as U.S. production growth begins to slow.

Daily Forecast

OPEC and the IEA appear to be at odds about supply in 2020, however, the focus for investors at this time is really on future demand growth. Helping to generate concerns about demand growth is the lingering battle between the world’s two biggest economies – the U.S. and China.

U.S. President Donald Trump is expected to discuss tariffs on Chinese goods set to be imposed on December 15 with top trade advisers as markets brace for fallout in China’s reaction.

The markets are expected to rally if a trade deal and/or a tariff delay is announced. Prices could break sharply if the U.S. decides to move forward with the new tariffs on Chinese imports.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US