WEEKLY ENERGY RECAP: All eyes on OPEC’s meet next week

Sat, 2019-11-30 23:29

Although Brent crude dropped below $63 per barrel by the week
closing, oil prices are still very close to the levels that
prevailed around OPEC’s meeting six months ago when an output cut
rollover was suggested till March 2020.

OPEC will meet next week on Dec. 5-6 and so far the efforts of
the OPEC+ group of producers have been successful in absorbing the
market surplus.

At the end of 2016 OECD stocks were 299 million barrels above
the latest five-year average, which was OPEC’s key measure for
its oil output strategy for those three years.

OECD commercial oil stocks for March 2018 were 40 million
barrels below the latest five-year average, which meant that the
OPEC+ output cuts of 1.8 million barrels per day (bpd) since
January 2017 were successful in driving OECD commercial oil stocks
below the five-year average within just 15 months of the new 
production cut strategy.

The continuing efforts in the past three years have ensured that
the market is in balance and preventing any surplus building
up.

By January this year OECD commercial oil stocks were at 19
million barrels above the latest five-year average — which
coincided with the latest OPEC+ output cuts of 1.2 million bpd.

According to the OPEC monthly oil market report  of November
2019, OECD commercial oil stocks stand at 28.2 million barrels
above the latest five-year average. This means that OECD commercial
crude stocks have been increasing regardless of OPEC+ output cuts.
However, OPEC monthly reports forecast a sharp fall in calls on its
crude in the first half of next year, while non-OPEC supply is set
to increase ahead of weak global demand growth.

OPEC’s own forecast for global oil demand growth remains
unchanged in 2020 at 1.08 million bpd, but demand is projected to
be flat in the first and second quarter, when non-OPEC supply is
set to rise by 1.79 million bpd.

However, there are many non-OPEC supply uncertainties in
2020. 

According to OPEC’s own outlook, a rollover remains the most
likely outcome of the 177th meeting.

• Faisal Faeq is an energy and oil marketing adviser. He was
formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq

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Source: FS – All-News-Economy
WEEKLY ENERGY RECAP: All eyes on OPEC’s meet next week