Oil Price Fundamental Daily Forecast – Pressured as Demand Concerns Outweigh Trade Talk Optimism

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply lower on Friday with traders shrugging off potential positive developments over U.S.-China trade relations, instead choosing to focus on another bearish report from the International Energy Agency (IEA).

Earlier in the session, oil prices rose as OPEC’s outlook for oil demand next year fueled hopes that the producer group and its allies will keep a lid on supply when they meet to discuss policy on output next month.

At 11:15 GMT, January WTI crude oil futures are trading $59.58, down $0.30 or -0.53% and January Brent crude oil is at $61.79, down $0.49 or -0.79%.

Late Thursday, the market was underpinned by the hopes that the United States and China could soon sign an agreement to end their trade war after White House economic adviser Larry Kudlow said a deal was “getting close,” citing what he called very constructive discussions with Beijing.

OPEC Expects Demand to Fall

Early Friday, prices rose after OPEC said yesterday it expected demand for its oil to fall in 2020. OPEC said demand for its crude would average 29.58 million barrels per day next year, 1.12 million bpd less than in 2019. That points to a 2020 surplus of about 70,000 bpd, which is less than indicated in previous reports.

OPEC+ Faces ‘Major Challenge’ from Competitors Surging Output:  IEA

The early strength didn’t last and the markets turned lower after the IEA said on Friday, OPEC and its friends face stiffening competition in 2020, adding urgency to the oil producer group’s policy, according to Reuters.

“The OPEC+ countries face a major challenge in 2020 as demand for their crude is expected to fall sharply,” the Paris-based agency said in a monthly report.

The IEA estimated non-OPEC supply growth would surge to 2.3 million barrels per day (bpd) next year compared to 1.8 million bpd in 2019, citing production from the United States, Brazil, Norway and Guyana.

“The hefty supply cushion that is likely to build up during the first half of next year will offer cold comfort to OPEC+ ministers gathering in Vienna at the start of next month,” it added.

While U.S. supply rose by 145,000 bpd in October, the IEA said, a slowdown in activity that started earlier this year looks set to continue as companies prioritize capital discipline.

Demand for crude oil from OPEC in 2020 will be 28.90 million bpd, the IEA forecast, 1 million bpd below the exporter club’s current production.