Dwindling fortunes as oil oversupply projected to persist despite OPEC deal

GLOBAL – The International Energy Agency has said there will be an oversupply of crude oil next year even if the Organisation of Petroleum Exporting Countries (OPEC) and its allies deliver newly-announced production cuts in full.

OPEC, in its latest monthly oil market, said significant and successful effort of countries participating in the Declaration of Cooperation (DOC) had helped the global oil market to remain relatively balanced in 2019.

It said countries participating in the (DOC) reaffirmed their continuing commitment to oil market stability as they decided this month to adjust production further by another 500,000 barrels per day, adding to the previous adjustment of 1.2 million bod.

“This is to stabilise the market in the interests of both consumers and producers, as well as the wellbeing of the global economy,” OPEC said.

But the IEA said in a monthly report that oil inventories might accumulate by 700,000 bpd in the first quarter even if OPEC and its allies implement the entire cutback of 2.1 million bpd agreed in December 2019.

According to the IEA report, OPEC and its partners are getting some solace from a recent recovery in oil demand.

The report revealed that global consumption increased at the strongest rate in a year during the third quarter, expanding by 900,000 bpd, a pace almost twice the one experienced in the second quarter.

IEA however predicts that demand is set to accelerate further in 2020, expanding by 1.2 million bpd — about 1.2 per cent — to average 101.5 million bpd.

OPEC may also be reassured that supply from some of its rivals, such as the United States, Brazil and Ghana, is increasing less quickly than the IEA previously forecast.

The agency has already lowered its projections for non-OPEC production growth in 2020 by about 200,000 bpd.

Supplies outside OPEC will nonetheless expand much more vigorously than world demand, swelling by 2.1 million bpd next year as a new tide of American shale-oil is joined by offshore projects once considered unviable in an era of constrained prices, from Brazil, Norway and Guyana.

As a result, the agency said that the surplus in global markets may swell to as much as 1 million barrels a day during the second quarter.

This undesirable change poses a considerable challenge for the cartel and its allies, who will meet again in early March to consider their next move.

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