– Oil prices fell on Friday fuelled by concerns about rising supplies next year, although losses were checked by signs of progress towards ending the U.S.-Chinese trade row.
White House economic adviser Larry Kudlow said on Thursday a deal was “getting close”, citing what he described as very constructive discussions with Beijing.
Benchmark Brent crude was down 43 cents at $61.85 a barrel by 1101 GMT, while West Texas Intermediate crude slipped 22 cents to $56.55 a barrel. The International Energy Agency weighed on prices, by saying the Organization of the Petroleum Exporting Countries and its allies, a grouping known as OPEC+, faced “a major challenge in 2020 as demand for their crude is expected to fall sharply.”
OPEC Secretary General Mohammad Barkindo had painted a more upbeat picture this week, saying growth in rival U.S. production would slow in 2020, although a report by the group had also said demand for OPEC oil was expected to dip. OPEC and its allies have cut supply to prop up prices and are expected to discuss output policy at a meeting on Dec. 5-6 in Vienna. Their existing production deal runs until March.
“Will they maintain cuts or go deeper? If OPEC doesn’t budge, we’ll see a significant stock build in the first half,” said Harry Tchilinguirian, global head of markets strategy at BNP Paribas.
He said it was still not clear how long it would take for any deal to end the U.S.-China trade row, which has weighed on the global economy and undermined demand for fuel.
“Essentially we’ve had a range bound market for the last nine sessions due to the lack of clarity on these two key issues,” Tchilinguirian said. OPEC said demand for its crude would average 29.58 million barrels per day (bpd) next year, 1.12 million bpd less than in 2019, pointing to a 2020 surplus of about 70,000 bpd.
U.S. production has continued climbing, reaching a weekly record of 12.8 million bpd last week, while U.S. oil inventories rose faster than expected last week. However, rising U.S. output and competition from production in Brazil, Norway and Guyana next year has been squeezing profits for U.S. shale producers, which plan another spending freeze in 2020 and a slowdown in production growth.