Supply curbs by Opec are being undermined by “relentless” production growth outside of the cartel led by the US, a trend that will continue in 2020.
The International Energy Agency (IEA) said in its monthly oil market report that non-Opec supply would accelerate from 1.9 million barrels a day (b/d) to 2.3 million b/d next year.
“Plentiful supply will be available,” said the IEA in its outlook that includes 2020 estimates for the first time. US gains will be supported by Brazil, Canada and Norway.
This will not only keep price increases at bay, but also reduce the amount of oil the world needs from Opec countries to 29.3 million b/d in 2020, the IEA said. The figure is 600,000 b/d less than the output from the group in May.
Opec and allies outside of the cartel including Russia pledged to cut production by 1.2 million b/d from January, a level they have since exceeded because of US sanctions against Iran and other supply disruptions.
Oil ministers are due to meet in Vienna at the end of June or beginning of July to discuss whether to continue with the curbs policy. How long to keep on cutting production in the face of surging US shale supply has been a perpetual worry for traditional oil producers.
“[Ministers are] faced with short-term uncertainty over the strength of demand and relentless supply growth from their competitors,” said the IEA.
The IEA revised lower for a second consecutive month its global oil demand growth forecast for this year to 1.2 million b/d, from 1.3 million b/d, on a “vulnerable global economy”.
In the first quarter of this year growth was only 300,000 b/d – the lowest for any three-month period since 2011 – on a warmer winter in Japan, a petrochemicals slowdown in Europe and weaker motor fuels demand in the US. It will tick higher to 1.4 million b/d in 2020. – Copyright The Financial Times Limited 2019
