OPEC's first prediction for 2020 demonstrates a fierce fight on the oil market share
The attempts of OPEC to increase oil prices are set to become even more difficult next year, with greater market share competition from greater non-OPEC production, the group's first 2020 prediction demonstrates.
The analytical arm of the producer group on Thursday supplied its 14 members with a sobering 2020 perspective, predicting that demand for OPEC crude would fall by more than 4 percent from this year as a rise in manufacturing from the US, Brazil and Norway threatens their market share.
OPEC projected in its closely watched monthly petroleum industry report, which included its first fundamental prediction for next year, that the so-called crude call would drop to 29.27 million b / d in 2020— down 1.34 million b / d from the 2019 projection— including an eye-catching 28.75 million b / d in the first quarter.
The call for OPEC crude indicates the limit of how much oil the block can generate and still prevents the accumulation of barrels from being stored at a price-dampening rate.
Based on an average of the six secondary sources used by the organisation to monitor member production, including S&P Global Platts, OPEC pumped 29.83 million b / d in June.
Last week, OPEC, Russia and nine other allies agreed to extend their mutual 1.2 million b / d production reduction contract by the first quarter of 2020, but the information show that they will have to cut further if they want to maintain the market balanced.
OPEC stated in its report that its supply curbs would "prevent a destabilizing increase in oil inventories," and that OPEC and its associates were "reaffirming their ongoing dedication to promoting and enhancing the stability of the petroleum industry" by expanding the agreement.
As of May, total petroleum reserves retained by OECD nations stood at 2,925 billion barrels, OPEC said, some 25 million barrels higher than the bloc's five-year average, although authorities said they could alter the benchmark to a higher point.
The study predicts that the worldwide demand for oil will increase by 1.14 million b / d next year to reach 101.01 million b / d— for the first moment in history exceeding 100 million b / d.
But that would be more than offset by a non-OPEC production boost of 2.40 million b / d, led by a US rise of 1.70 million b / d, along with fresh areas coming online in Brazil and Norway.
U.S. crude oil production is expected to average 13.33 million b / d by December 2019, OPEC estimates, with solid shale output growth coming behind fresh debottlenecking infrastructure that will allow more oil to reach the market.
"With 2.5 million b / d of the anticipated fresh pipeline capability from the Permian to the US Gulf Coast, production from the booming Permian Basin is projected to expand without any restrictions," said OPEC.
SHORT-TERM BOOST
The image looks much brighter for OPEC in the brief term.
In the third quarter, seasonal demand will increase the call for OPEC crude to a solid 31.46 million b / d, the study estimates, possibly giving a boost to oil prices that OPEC's oil-dependent economies will welcome.
The fourth quarter call will drop to 30.01 million b / d— even above the June production stage of the producer group.
But the projection for 2020 indicates that the boom might end there.
According to secondary sources, the 29.83 million b / d pumped by OPEC in June was a 68,000 b / d drop from May.
Saudi Arabia's largest member generated 9.81 million b / d in June, an increase of 126,000 b / d from May, approximately secondary sources, and well below its 10.31 million b / d quota under the OPEC / non-OPEC supply contract. A June manufacturing figure of 9.78 million b / d was self-reported by the Kingdom.
On Thursday, a Saudi oil official informed Platts that Saudi Arabia would keep its output below 10 million b / d by August as it attempts to lead by instance on the reductions.
Iran's production dropped 140,000 b / d to 2,23 million b / d in June, estimated by secondary sources. It is exempt from the supply agreement and a manufacturing figure has not been self-reported.
According to secondary sources, Iraq, OPEC's second-largest producer, continues well above its 4.51 million b / d quota, pumping 4.72 million b / d. It reported 4.60 million b / d on its own.
According to secondary sources, Nigeria saw the largest jump in manufacturing, with 130,000 b / d rising to 1,86 million b / d. It reported an even greater figure of 1.96 million b / d, approximately 270,000 b / d above its quota.
