Analysts see few surprises in 2020 as OPEC+ cuts trim surplus

Oil prices are likely to remain in check during 2020 as OPEC+ production cuts are offset by higher output from other countries. Oil prices were little changed on last Monday as Russia said an OPEC-led producer group may consider easing output cuts next year. The Trump administration on last Thursday renewed a waiver for companies to wind down transactions with the Dalian unit. Oil prices hovered near the highest in three months in thin pre-Christmas trading on last Thursday.

Analysts see prices climbing higher in the middle of the year as stronger emerging-market demand. Oil prices steadied on last Wednesday after U.S. government data showed a decline in crude inventories. Saudi Arabia surprised the market in early December with a deeper supply cut. Brent futures gained 12 cents to trade at $66.22 a barrel, while U.S. West Texas Intermediate lost 1 cent.

It along with signs of a thaw in the U.S.-China trade conflict that may boost demand. Oil prices trickled a fraction lower on last Tuesday. Brent futures climbed 43 cents, or 0.7%, to $64.63 a barrel by 0426 GMT, its highest since Sept. 23. It lead some prominent analysts to revise their forecasts higher. Global oil inventories could rise sharply despite OPEC. Goldman Sachs Group Inc. increased its estimate for Brent crude to $63 a barrel from $60.

Offsetting support from some investor optimism that an initial U.S.-China trade deal would be signed soon. Chinese tanker company on which it had imposed sanctions in September for allegedly transporting Iranian oil. Brent crude gained 37 cents to settle at $66.54 per barrel, for its sixth straight day of gains. Brent futures gained 7 cents to settle at $66.17 a barrel while U.S. Brent crude oil futures had slipped by two cents to $65.32 a barrel by 0422 GMT.

“This points to a tighter inventory path than we previously expected, especially through first-half of 2020″, President said.

West Texas Intermediate will average $58.50 a barrel in 2020, according to the median of analyst estimates compiled by Bloomberg. Despite the additional curbs and a reduction in our forecast of 2020 non-OPEC supply growth. West Texas Intermediate (WTI) ended the session down 1 cent at $60.93 a barrel per barrel. It compares to the current level of around $60 and the average so far in 2019 of $56.95.

Risk appetite ran wild after Trump signaled the he made a deal with China. The IEA said that only 530,000 bpd of crude would be withdrawn from the market. Brent is forecast to average $64.25 a barrel. The waiver, good until Feb. 4, 2020, allows activities and transactions ordinarily incident. Under a partial trade agreement announced last week, Washington will reduce some tariffs on Chinese imports.

The forward curve is in backwardation, with spot prices for WTI about $4 a barrel and Brent about $5.25 a barrel higher than December 2020 contracts. Trading volume was thin, with oil headed for a third consecutive weekly rise. Oil prices are struggling to extend their gains as investors await further details regarding the U.S.-China. A slump in the U.S. dollar against the backdrop of a strong pound also helped to boost commodity prices.

The Trump administration reimposed sanctions on Iran’s oil exports last year after unilaterally withdrawing from a 2015 deal. The deal between the world’s two largest economies has improved the global economic outlook. U.S. crude fell by 1.1 million barrels in the week to Dec. 13 to 446.8 million barrels. The so-called Phase One trade deal between both countries has been absolutely completed.

The premium for near-term delivery comes as producers sell forward contracts to hedge their output for the next couple of years. The agreement is yet to be signed and several Chinese officials told Reuters the wording of the agreement. Asian share markets jumped to multi-month highs on last Friday. The contrasts with OPEC’s own research which forecasts a small deficit in the market next year. Brent crude settled up 25 cents, or 0.4%, at $66.39 after a day.

JPMorgan Securities LLC analysts including Abhishek Deshpande see Brent averaging $64.50 a barrel. The Trump administration has sought to cut Iran’s crude exports to zero. Stronger emerging market growth prompted the bank to tighten its oil balance in 2020. Gasoline and distillate inventories grew last week by 2.5 million barrels to 237.3 million barrels. JP Morgan and Goldman Sachs have revised their oil price forecasts for the next year upwards.

Bill Baruch says “The market’s happy with (Dec. 15) tariffs out of the way and the trade truce”.

300,000 barrels a day compared with a 100,000 barrel-a-day surplus previously. China’s finance ministry on Thursday published a new list of six U.S. products. The market reaction was abruptly stronger due to the fact that we were so far away from industry. The upward trend from optimistic demand expectations such as from recent developments. The bank also cited Petrobras’s recent reduction of its production guidance for next year.

Michael Tran and Helima Croft at RBC Capital Markets see Brent at $64 a barrel. Prices had risen more than 1% in the previous session after the announcement last week. Lingering doubts about demand will cap the upside on prices. OPEC’s own research, which forecasts a small deficit in the market next year. Lower supply next year due to a planned cut by the Organization of the Petroleum Exporting Countries (OPEC).

The noting inventories are tighter than anticipated. Oil has also gained momentum from announcements about deeper output cuts by major crude producers. Norway’s oil output in November hit a 32-month high at 1.71 million barrels per day. OPEC+ output is set to outstrip projected demand for its crude by 700,000 bpd. It signaling that supply from Johan Sverdrup in Norway and Guyana are and will be absorbed with relative ease.

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