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 email@example.com
(END) Dow Jones Newswires
December 11, 2019 13:46 ET (18:46 GMT)
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