The Organization of the Petroleum Exporting Countries (OPEC)
and its allies face a major challenge in 2020 as demand for crude is expected to
fall sharply.
The IEA estimated non-OPEC supply growth would surge to 2.3
million barrels per day (bpd) next year as compared to 1.8 million bpd in 2019,
based on production hike in 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.
While US 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 28.9 million
bpd, the IEA forecast; one million bpd below the exporter club’s current
production.
The recovery by OPEC’s de facto leader Saudi Arabia from
attacks on the country’s oil infrastructure contributed 1.4 million bpd to the
global oil supply increase in October of 1.5 million bpd.
With plans underway for the Aramco IPO and the persistent
need for revenues to fund the government budget, Riyadh has every incentive to
keep oil prices supported.
Saudi state oil company Aramco, the world’s most profitable
firm, scheduled to start its share sale on 17th November in an IPO
that may help in mobilizing between US$20 billion to US$40 billion.
The IEA said that if some or all tariffs were lifted in
coming months, world economic growth and oil demand growth would both rise
significantly, though the rebound may not be immediate.
Sluggish refinery activity in the first three quarters has
caused crude oil demand to fall in 2019 for the first time since 2009, but
refining is set to rebound sharply in the fourth quarter and in 2020.
