INE crude oil rose 27.5% in 2019 as the trade situation improved, and better-than-expected Chinese manufacturing PMI data suggested that China’s economy is growing steadily. In addition, traders are also paying close attention to the situation in the Middle East after the US air strikes in Iraq and Syria.
Trade consulting firm Ritterbusch and Associates said trade optimism continues to stimulate demand for riskier assets such as oil, other industrial commodities and stocks.
Looking forward to 2020, some analysts believe that abundant global crude oil inventories are the main obstacle for OPEC+ to curb crude oil production. Harry Tchilinguirian, global oil strategist at BNP Paribas, said that although OPEC+ is committed to further reducing production in the first quarter of 2020, it does not believe that this will be enough to avoid large-scale global inventories, and there are still downside risks to crude oil fundamentals.
Crude oil demand in 2020
United States : The main driving force of OECD oil demand in 2020
The latest monthly data from the U.S. Energy Information Administration shows that U.S. crude oil demand growth returned to positive levels in September after recording a decline in August 2019. Demand The year-on-year increase of 140,000 barrels per day was mainly driven by demand for petroleum products.
OPEC predicts that the United States will remain the main contributor to OECD crude oil demand growth in 2020, and overall risks are balanced up and down. Expectations for U.S. economic growth are the main indicator of rising crude demand, while fuel alternatives, vehicle efficiency and international trade tensions are factors weighing on demand.
Europe: Crude oil demand is expected to decline slightly by 300,000 barrels per day in 2020
The outlook for European oil demand in 2020 is expected to decline slightly, and risks tend to be downward. European oil demand faces a number of uncertainties in 2020 related to the region’s historical oil production demand base, fuel efficiency and substitution, unresolved debt concerns, and other related geopolitical issues.
OECD European oil demand is expected to stabilize in 2019, while oil demand in 2020 is expected to decline by 300,000 barrels per day.
The chart below shows changes in OECD European crude oil demand
Japan: The economy will continue to decline in 2020, and crude oil demand will tend to decline
Japan’s overall crude oil demand will decline in 2019, mainly due to the decline in the country’s main economic indicators. This situation is expected It will continue in 2020.
OPEC expects Japan’s crude oil demand to be further biased to the downside in 2020; efficiency and fuel alternatives are the main factors for the decline, while crude oil consumption in the industrial sector may moderate expectations for an overall decline in demand.
The chart below shows the changes in crude oil demand in OECD Asia
China: Crude oil demand growth is expected to only increase by 310,000 barrels per day in 2020
In October 2019, China’s oil demand increased by about 350,000 barrels per day year-on-year, which was better than the growth rate of about 220,000 barrels per day in September. China’s total demand for petroleum products reaches about 13.2 million barrels per day. The growth in oil demand depends on the demand for kerosene, chemical light oil and diesel.
China’s oil demand growth in 2019 is expected to be slightly slower than in 2018 as economic activity cools down from last year. Oil demand in 2020 is expected to slow further and be essentially the same as in 2019 as the economy Growth expectations also fell. In addition, China continues to promote energy quality projects aimed at reducing emissions and hopes to continue to promote the use of natural gas and coal alternatives in 2020.
OPEC predicts that China’s crude oil demand will grow by 350,000 barrels per day in 2019 and 310,000 barrels per day in 2020.
Middle East: Crude oil demand growth in 2020 will be almost the same as in 2019
Looking forward to 2020, the growth of crude oil demand in the Middle East is expected to be challenged on many fronts, mainly involving Geopolitical issues and economic transformation policies, including subsidy reduction procedures. OPEC expects oil demand from Saudi Arabia, Iraq, the United Arab Emirates and Kuwait to rise in 2020.
Transportation fuels, especially gasoline and industrial fuels, mainly diesel and residual fuel oil, will play an important role in the growth of total oil demand in the region. OPEC predicts that demand for crude oil in the Middle East is expected to increase by 60,000 barrels per day in 2019 and 70,000 barrels per day in 2020.
Crude oil supply issues in 2020
The supply and demand side of oil prices in 2019 will face many possible variables, and macro demand will decline. , supply is upward, and contradictions are highlighted in stages. Moreover, supply and demand tend to be in excess, so oil prices as a whole show a wide range of fluctuations with a narrowing range. In 2020, against the backdrop of OPEC’s deepening of production cuts, natural reduction of U.S. crude oil production, and limited other increments, it is expected that the overall supply and demand will show a gap of approximately 980,000 barrels per day.
At the end of December 7, 2019, OPEC made a decision to deepen production cuts. That is, by March 31, 2020, OPEC+ will deepen production cuts by 500,000 barrels, that is, the production reduction will reach 1.7 million barrels per day in the first quarter of 2020.
OPEC+ decided to reduce production by 160,000 barrels per day in Saudi Arabia, 70,000 barrels per day in Russia, 50,000 barrels per day in Iraq, 21,000 barrels per day in Nigeria, and 60,000 barrels per day in the United Arab Emirates. Angola needs no new�, the market focus will gradually shift from the balance of supply and demand of crude oil to the balance of supply and demand of refined oil. The matching degree of refinery supply and terminal consumption will be the most critical balance point.
It is expected that the oil price shock range will move upward in 2020
In 2019, the international crude oil market has been in a state of seesawing between long and short. On the one hand, trade friction threatens global economic growth and crude oil demand prospects, suppressing oil prices; on the other hand, geopolitical risks and the extension of production reduction agreements by major oil-producing countries provide support to oil prices. However, throughout the year, multiple forces prevailed, leading to a sharp rise in international oil prices.
The overall prediction of oil prices in 2020 is that the shock range will move upward, the bottom will rise, and the two ends will be high and the middle will be low. The price range of Brent oil is US$65-75/barrel, the price range of US oil is US$60-68/barrel, and the fluctuation range of domestic INE crude oil during the year is estimated to be 460-550 yuan/barrel.
The prediction of supply and demand balance for the whole year of 2020 is for the first quarter: the shortage will be greater in February and March; the second quarter will be the turning point of supply. 4. The degree of excess supply and demand is relatively large in May, especially when the current supply-demand gap in May is 1.46 million barrels per day; it will improve in September of the third quarter, and there will be a gap in the overall supply and demand in the second half of the fourth quarter. Therefore, throughout the year, tight balance between supply and demand will appear at the beginning and end of the year, and the overall supply will show a surplus in the middle of the year. </p
