THE price of Bonny Light, Nigeria’s premium oil grade, which surged to $67.82 last week, has dropped slightly to $67.02 per barrel in the global market.
Investigation showed that the drop in price was attributed to the international Energy Agency’s speculation that the market was still in custody of excess supply. In its report obtained by us IEA stated: “For the last several months in this Report we have suggested that in early 2020 the oil market is likely to see a significant surplus of supply over demand.
On 6 December, countries participating in the OPEC+ agreement took a step to address this imbalance by deepening their cuts from 1.2 mb/d to 1.7 mb/d. Saudi Arabia once again showed its willingness to shoulder a greater burden by volunteering an additional reduction of 0.4 mb/d to take the total cut to 2.1 mb/d, effective January 1.
“The voluntary cut by the Saudis has already been partially delivered but the overall effectiveness of the OPEC+ agreement depends on the willingness of all its parties to fully comply, including those whose compliance so far has been less rigorous. “This revised deal excludes from the production ceiling 1.5 mb/d of condensate output by non-OPEC producers. Russia, in particular, now has 0.8 mb/d of supply that can legitimately be increased. If all the countries comply with their new allocations and Saudi Arabia delivers the rest of its voluntary cut of 0.4 mb/d, the fall in production volume versus today will be about 0.5 mb/d.”
However, in its December 2019 market report, OPEC stated: “The global economic growth forecast remains at 3.0 per cent for both 2019 and 2020. US growth remains at 2.3 per cent for 2019 and 1.8 per cent for 2020. Euro-zone growth remains at 1.2 per cent for 2019 and 1.0 percent for 2020. Japan’s growth forecast is unchanged at 0.9 per cent for 2019, but revised up to 0.6 per cent for 2020, considering a forecast positive net effect from the announced fiscal stimulus. China’s growth forecast is unchanged, standing at 6.2 per cent for 2019 and 5.9 per cent for 2020. India’s growth forecast is revised down to 5.5 per cent for 2019 and to 6.4 percent for 2020, after less-than-expected growth in the first three quarters of 2019. Both Brazil’s and Russia’s forecasts are revised up slightly, after both economies continued accelerating in 3Q19.
Brazil’s 2019 growth forecast is revised up to 1.0% for 2019 and to 1.7% for 2020. Similarly, Russia’s forecast is revised up to 1.1% for 2019 and 1.3% for 2020.” It stated: “Demand World oil demand growth is expected at 0.98 mb/d in 2019, unchanged from last month’s report. In the OECD region, OECD Americas is estimated to lead oil demand growth because of steady light distillate requirements. China is assessed to lead demand growth globally, as well as within non-OECD countries, in response to steady petrochemical feedstock demand for transportation fuels.
“In 2020, world oil demand is forecast to increase by 1.08 mb/d, also in line with last month projections. Oil demand growth is forecast to originate largely from Other Asia, followed by China. OECD countries are projected to consume an additional 0.07 mb/d as compared to the current year, while non-OECD countries are expected to remain the driver for oil demand growth in 2020, adding an estimated 1.01 mb/d.”
It added: “Non-OPEC oil supply growth forecast for 2019 remains at 1.82 mb/d, unchanged from last month’s report. The US liquids supply growth also remains unchanged at 1.62 mb/d, the an upward revision in 3Q19 is now offset by a lower estimate for 4Q19. Similarly, the non-OPEC oil supply growth forecast for 2020 remains unchanged from last month’s forecast at 2.17 mb/d. An upward revision in the UK’s oil supply forecast is offset by a downward revision in Russia. The 2020 non-OPEC supply forecast remains subject to some uncertainties, including the degree of spending discipline by US independent oil companies.”
Source :Vanguard News
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