ABU DHABI/NEW YORK/LONDON
After a year of volatility in the oil market, prices are heading into 2020 with a sense of optimism, with oil markets closing on a fourth straight weekly high.
Brent was trading at $68.16 with West Texas Intermediate (WTI) on $61.72, as oil prices continued to the ride the momentum of a US-China phase-one trade deal and production cuts by Opec+, which will come into effect starting in January — bringing the group’s total production cuts to 1.7 million barrels per day (bpd).
Prices in the week also received a boost after the US Energy Information Administration (EIA) showed a decrease of 5.5 million barrels of US crude inventories in it latest weekly petroleum report.
Despite the positivity, 2020’s main challenge to oil markets will be continued oversupply. The International Energy Agency for its 2020 outlook estimates that oil markets will have a surplus of 0.7 bpd in the first quarter of 2020, with UBS putting oil surplus at 0.6 bpd in the first half of 2020. Opec’s own forecast also points to a surplus in oil markets in 2020 with supply, particularly from non-Opec producers, outpacing demand.
The EIA in its outlook for 2020 said the US will average just over 13 million bpd next year with a net export average of 570,000 bpd in oil and petroleum, as the US continues to assert itself as a major player in the oil industry.
Patience with Opec+ production cuts may also be wearing thin as highlighted last week by Russian energy minister Alexander Novak who said that curbs on production could start getting loosened in 2020 in order to protect market share, according.
2020 will also be a big year for the UAE in terms of its own oil production, as Adnoc prepares to ramp up oil production to 4 million bpd by the end of next year. 2020 will also see Adnoc listing its Murban crude on a futures oil market for the first time in its history, with the new pricing mechanism set to be traded on the newly formed ICE Futures Abu Dhabi.
Based from the Abu Dhabi Global Market, the futures trade market is expected to go live between the second and third quarters of 2020. Stakeholders in the new venture also include several of the world’s leading oil companies such as BP, Shell, Total and CNPC.