The international trade situation has improved, and international oil prices have risen slightly. However, weak demand in the oil market and oversupply still limit the increase in oil prices. Previously, the International Energy Agency (IEA), the U.S. Energy Information Administration (EIA) and OPEC all predicted that the oil market would experience overcapacity in 2020. Despite this, there are still crude oil traders betting that the oil market will be significantly tight next year.
Crude oil inventories will decrease next year?
The IEA, EIA and OPEC all predict that the oil supply of non-OPEC countries will increase by about 1 million barrels per day next year, exceeding global oil consumption; the daily oil production of non-OPEC countries will increase by 2.2 million to 2.4 million barrels, while consumption It increased by only 1.1 million barrels to 1.4 million barrels. If these forecasts are correct, the result will be a significant build-up in crude and refined product inventories unless OPEC and its allies further cut their own production.
Since the beginning of 2015, as the crude oil market gradually recovered from the plunge in 2014 and 2015, Brent crude oil futures have gradually shifted to backwardation.
But the current degree of backwardation is unusual: previous backwardations of similar magnitude have recently been temporary, related to sudden disruptions in oil supplies. Attacks on Saudi Arabian oil facilities in 2019 or the tightening of U.S. sanctions on Venezuela and Iran in 2018 created huge backwardation.
However, the current backwardation has nothing to do with a sudden reduction in oil supply. Instead, it reflects a combination of steady supply tightening and expectations for faster demand growth in 2020: U.S. sanctions continue to limit exports from Iran and Venezuela; lower prices are expected to slow U.S. shale gas growth; OPEC+ is likely Extend current production limits into next year.
Global economic growth may avoid recession
In the past 20 years, oil consumption has grown at an average annual rate of 1.5% growth, which equates to an increase of 1.5 million barrels per year. If oil consumption growth returns to long-term trend levels next year, daily oil consumption may increase by 150,000 to 300,000 barrels compared with current forecasts by major institutions. If oil consumption rebounds as strongly as it did in 1999 by 2.1%, oil use would increase by 700,000 barrels per day to 1 million barrels per day compared with the main forecast. As a result, a cyclical recovery in oil consumption is likely to absorb much of next year’s expected growth in non-OPEC production.
The international trade situation and the resulting impact on global economic growth will be crucial to the oil market balance and prices in 2020. Currently, most major economic forecasters, including the International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD), believe that global economic growth will remain sluggish in 2020. But if global expansion accelerates again, both economic activity and oil consumption are likely to grow faster.
After the International Monetary Fund and the OECD, the main oil statistics agency predicts that global economic growth will only accelerate slightly next year, which means that the oil market will be oversupplied. In contrast, oil traders are increasingly betting that economic growth will accelerate, eliminating an expected oil glut and even pushing the market into the red.
Rabobank said there is still room for oil prices to rise next year. Rabobank said that looking ahead, it believes underlying oil data will improve in the coming weeks and U.S. crude inventories will fall to their lowest levels in recent years by the end of the year. Entering 2020, we believe there is still room for strong growth in oil prices.
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