The U.S. Energy Information Administration expects average crude oil prices will be lower in 2020 than in 2019 because of rising inventories. Outside the United States, production is expected to continue to grow in Brazil, Norway, and in Guyana where US oil major ExxonMobil began producing oil at the giant Liza field this month.
Reuters said in a report on Monday the rise in oil price this year was muted despite sanctions, supply cuts and an attack in Saudi Arabia.
Prices are likely to remain rangebound in 2020 as swelling supplies, particularly from the United States, offset cuts from the Organization of the Petroleum Exporting Countries and weakening worldwide demand, brokers and analysts said.
U.S. crude oil CLc1 is on track to end 2019 roughly 35% higher. Since the end of March, it is up just 3%, after rallying early in the year after the United States introduced sanctions on Venezuela. Brent has gained 26% but is off by 1% since the first quarter.
Liza Crude produced at Guyana’s Stabroek Block will be sold at Brent market price when tankers begin lifting the first shipments in coming weeks. The government’s first lift is expected in February 2020 according to the Department of Energy (DE).
Reuters said investors and analysts point out production in the United States and weak demand kept prices under control in 2019 and the US is on track to be a net petroleum exporter on an annual basis for the first time in 2020. Output is expected to average 13.2 million bpd, an increase of nearly a million bpd from 2019.
“Demand growth cratered while U.S. production continued to barrel along at high rates and geopolitical risk eased,” Bob McNally, president of Rapidan Energy Group.
“And now, at the end of the year, weary investors are looking to next year and seeing a tsunami of oil.”
Investor concern over peak oil demand is expected to weigh on prices next year, particularly as the urgency around action against climate change has increased. Also, a long-term resolution of the U.S.-China trade war seems elusive, keeping market watchers wary of predicting energy demand growth in the world’s two largest economies.
Last week JP Morgan raised its oil price outlook and forecast supply-demand balance to tighten next year against the backdrop of the OPEC and its allies increasing output cuts and stronger economic growth in emerging markets.
The investment bank revised its Brent price forecast to $64.5 per barrel in 2020 from $59 earlier, although it expects prices to slip to $61.50 in 2021.
