If global oil demand growth continues to languish with uncertainties around the global economy and Brexit, the oil market will likely have to cope with another oversupply next year, according to the International Energy Agency (IEA).
“Unless other things change, we will see a surplus probably, unless there is very strong demand growth recovery,” Keisuke Sadamori, the IEA’s Director for Energy Markets and Security, told CNBC on the sidelines of an energy event in Singapore.
“Overall, we will continue to see a well supplied market in 2020,” Sadamori said, echoing the IEA’s monthly oil report from earlier in October, which painted a rather gloomy picture of oil demand growth in the short term.
In the report earlier this month, the IEA cut its demand growth forecast by 100,000 bpd for both 2019 and 2020, to 1 million bpd and 1.2 million bpd, respectively. For the second quarter of this year, the IEA expects oil demand growth to quicken to 1.6 million bpd, thanks to a lower base for comparison in the same period of 2018 and to oil prices that are currently some 30 per cent lower compared to a year ago.
Other organizations, as well as analysts, have also been revising down their oil demand growth estimates for this year and next, citing increased uncertainties over the pace of the global economic growth amid the U.S.-China trade war, Brexit, and slowing growth in major economies including China, India, and Germany, for example.
Against this background, the market attention turns again on OPEC and its non-OPEC allies led by Russia, who need to decide in early December how to proceed with their production cut pact expiring in March 2020.
There is a growing consensus among experts and observers that the OPEC+ coalition may need to cut even deeper if it wants to prevent a large oversupply building in 2020 and sending oil prices even more uncomfortably low for major oil-producing nations.