OPEC Expects Lower Demand in 2020
January 16, 2020
The inventory report from the EIA reported that crude oil stocks were down 2.549 million barrels and the crude stocks at Cushing, Ok were up 342,000 barrels. Gasoline stocks were up by 6.7 million barrels which was more than double what was expected. Distillate stocks were up by a massive 8.2 million barrels which was more than 5 times what was expected. Refinery utilization capacity fell, and US crude oil production rose to a new weekly high of 13 million bpd. This report overall was bearish and put more selling pressure on prices. The market sold off after the report was release but did recovery off the lows as the “Phase 1” China and United State trade deal was signed.
The US and China announced an initial trade deal on Wednesday that will roll back some tariffs and increase Chin’s purchases of US goods and services. Under the Phase 1 trade deal, China has pledged to purchase at least an additional $200 billion worth of US farm products and other goods and services over two years over a baseline of $186 billion in purchases in 2017.
In its monthly report, OPEC stated that it expects lower demand for its oil in 2020 even as global demand increases. It raised its 2020 oil demand growth outlook by 140,000 bpd to 1.22 million bpd, while it cuts its 2020 demand forecast for OPEC crude by 100,000 to 29.5 million bpd, down 1.2 million bpd from the 2019 level. OPEC raised the 2020 non-OPEC oil supply growth forecast by 180,000 bpd to 2.35 million bpd. It said US total liquids production is expected to exceed 20 million bpd in the fourth quarter 2020.
Currently the most recent reports from EIA, OPEC and IEA have all forecast that global crude supplies will exceed demand in 2020. This outlook will be talked about as a factor that could limit the upside for crude prices. The China and US trade deal should help demand but progress will continue to be made for the next steps to continue to keep the outlook up for good energy demand.