Forecast show persistent surpluses, not the deficit that was expected to underpin rising prices.
After half a decade of lower spending on new projects, oil production growth was supposed to slow to a trickle just as demand was supercharged by a once-in-a-generation shake up in the shipping fuel market.
Many market commentators predicted that if $100 (Sh101) a barrel-oil was going to make a come back, it would happen in 2020. Excitement is fading fast. The first official assessment of 2020 comes from the International Energy Agency on Friday, but a first look at forecasts from consultants and traders for supply and demand balances show persistent surpluses, not the deficit that was expected to underpin rising prices.
The culprits: rising shale production, a slowing global economy and the prospect of a deepening trade war.
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“The balances for 2020 were already worrisome, and the downgrade in demand we are contemplating put them potentially in the ugly category,” said Roger Diwan, an OPEC watcher at consultant IHS Markit Ltd.
Consultants and oil traders have already taken a first stab, and their supply and demand results show, at best, a balanced market. Many forecast supply will exceed consumption, perhaps by a large margin.
The oil market, showing characteristics typical of an equity market, is already starting to reflect the potential for a surplus in 2020.