Oil Slips After OPEC, EIA Reports Forecast Robust Supply
December 11 2019 - 2:01PM
Dow Jones News
By David Hodari and Sarah Toy
Oil prices declined Wednesday after data from OPEC and the U.S.
signaled the world will remain flooded with oil into next year.
The Organization of the Petroleum Exporting Countries on
Wednesday forecast that oil supply from countries outside the
cartel will remain robust in 2020. Meanwhile, the U.S. Energy
Information Administration reported a rise in crude inventories
last week that defied analysts expectations of a drawdown.
Together, the reports nudged oil prices lower on Wednesday. West
Texas Intermediate, the U.S. benchmark, traded 0.86% lower at
$58.86 a barrel. Brent crude, the global measure of price, lost
0.9% to $63.75.
In its closely scrutinized monthly oil market report, OPEC held
its 2020 estimate for non-OPEC production growth at 2.17 million
barrels a day. The cartel also left its world oil-demand growth
forecast for this year and next unchanged at 980,000 and 1.08
million barrels a day, respectively, and held its global
economic-growth forecast at 3% for both 2019 and 2020.
The report comes days after OPEC and its allies completed a new
production pact to deepen their oil-output cuts of 500,000 barrels
a day to last through the end of March.
That move means the coalition will hold back roughly 1.7 million
barrels a day from global oil markets, and was partly motivated by
Saudi Arabia's need to bolster the initial public offering of Saudi
Aramco amid sagging oil prices.
"Evidently, significant and successful effort of countries
participating in the Declaration of Cooperation (DoC) have helped
the global oil market to remain relatively balanced in 2019," the
cartel said.
Alongside those cuts, Saudi Arabia also said it would maintain
its overcompliance, which would still see the nation produce less
oil than its new quotas.
Saudi production swung during September and October after
attacks on crucial Saudi oil-processing facilities at Abqaiq and
Khurais knocked out 5% of global oil supply, but November's figures
showed Saudi output fell by 412,000 barrels a day from the previous
month. That said, secondary reporting cited by OPEC showed a drop
of only 151,000 barrels a day in that month.
A growing glut of oil stocks from non-OPEC countries and
stagnant demand growth also were behind OPEC's decision to deepen
cuts.
"For 2019, the U.S., Brazil and Canada remain to be the key
drivers for growth, and this will continue in 2020 with the
addition of Norway," OPEC said in the report, adding that "2020
non-OPEC supply forecast remains subject to some uncertainties,
including the degree of spending discipline by U.S. independent oil
companies."
The EIA said Wednesday that U.S. crude stockpiles rose by
800,000 barrels during the week ended Dec. 6, compared with the
decrease of 2.8 million barrels that analysts and traders surveyed
by The Wall Street Journal had predicted. The increase marked the
sixth consecutive build to inventories.
U.S. inventories stand at 447.9 million barrels, about 4% above
the five-year average for this time of year.
The agency has forecast that the U.S. output will rise next year
and that the country will become, for the first time, a net
exporter of crude and oil products on an annual basis in 2020.
"This will not make OPEC's task of keeping the oil market
balanced any easier," said Carsten Fritsch, a Commerzbank AG
analyst.
Write to David Hodari at David.Hodari@dowjones.com and Sarah Toy
at sarah.toy@wsj.com
(END) Dow Jones Newswires
December 11, 2019 13:46 ET (18:46 GMT)
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