Published: Sun, November 17, 2019
Markets | By Otis Pena

OPEC+ faces "major challenge" in 2020 from competitors' surging output: IEA

OPEC+ faces

OPEC said demand for its crude would average 29.58 million bpd next year, 1.12 million bpd less than in 2019.

That points to a 2020 surplus of about 70,000 bpd, which is less than indicated in previous reports.

"On a positive note, signs of improving trade relations between the US and China, a potential agreement on Brexit after the UK's general election, fiscal stimulus in Japan, and a stabilisation of the downward slope in major emerging economies could stabilise growth at the current forecast level", OPEC said in the report. -Chinese trade row and lower non-OPEC supply.

OPEC kept its forecast for oil demand growth unchanged for 2019 and 2020, with overall demand breaching the 100 million b/d mark next year.

"Will they maintain cuts or go deeper?"

OPEC and the ten allies, which represent half of the world's oil production, decided in December to cut production by 1.2 million barrels per day and the strategy worked, since the price of a barrel rose by about 30% in the first quarter, before stabilising.

Many analysts said that supports the view among markets that there is a clear case for the group and other producers like Russian Federation - collectively known as 'OPEC+' - to maintain limits on production that were introduced to cope with a supply glut.

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Nigeria, the African leader in oil production, saw its daily production fall to 1.811 million barrels per day, a drop of 37,000 barrels compared to 1.848 million barrels in September (revised downwards, compared to the previous report, which pointed to 1.859 million). "This may continue into 2020 because non-OPEC countries will grow their production" significantly.

OPEC and its partners have been limiting supply since 2017, helping revive prices by clearing a glut that built up in 2014-2016 when producers pumped at will. "If you push prices higher it is going to hurt everyone and even if it doesn't, it's only going to play into the US producers' hands".

The forecast was cut by 36,000 Bpd from last month's estimate, growing now by 2.17 Mmbpd.

The IEA said that if some or all tariffs were lifted in coming months, "world economic growth and oil demand growth would both rise significantly", though the rebound may not be immediate.

OPEC warned the 2020 non-OPEC supply forecast remains subject to many uncertainties.

The rosy mood came after the Organization of the Petroleum Exporting Nations (OPEC) said Thursday it anticipated demand for its oil to decline next year.

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