Economy

Global oil market faces surplus in 2019 as demand growth slows

Global oil market faces surplus in 2019 as demand growth slows

The country's crude output is expected to average 12.06 million bpd in 2019, passing 12 million bpd sooner than expected on surging shale supply, the U.S. Energy Information Administration said this month. America's increasing inventories suggests "the nation's crude exports could become more active, resulting in excess global supplies". It may well be the case that Moscow is not opposed to lower oil prices-as it has indicated earlier as well-as they would eventually come to bite into USA shale drillers' performance.

OPEC is comprised of most of the world's top oil producers, meaning its decisions about production sway the prices of gas across the planet.

But while this argument at face value is persuasive, it's worth noting that less than a month ago most highly respected oil analysts were in a panic over the prospect of a global supply shortage due not only to the USA sanctions in Iran but plummeting output from Venezuela and other countries and figures showing strong, not weak, demand in 2019 and beyond.

"Increased supply from OPEC members of the Vienna Agreement saw compliance in October ease to 105%, the lowest since September 2017", the report read.

Brent crude oil fell 6.6 percent yesterday to just over $65 a barrel.

USA crude oil output from its seven major shale basins is expected to hit a record of 7.94-million barrels a day in December, the United States department of energy's Energy Information Administration (EIA) said on Tuesday.

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Anxious by a drop in oil prices due to record supply from Saudi Arabia, Russia and the United States, the Organization of the Petroleum Exporting Countries is talking of a U-turn just months after increasing production.

Most analysts expect USA output to climb above 12 million bpd within the first half of 2019.

Tuesday's seven-percent drop was due to ongoing worries about weakening global demand and oversupply. One source said Iran does not want to have a production target in a new agreement as it is facing lower exports due to USA sanctions.

Traders said the benchmarks reversed earlier losses on signs China and the United States may be taking steps to de-escalate their bitter trade dispute. Saudi Arabia is the largest crude oil producer within OPEC, although the US and Russian Federation now produce more oil than the kingdom. Another source, an OPEC delegate, agreed that a larger cut than 1.4 million bpd was possible, depending on the market. Oil is priced in dollars and the USA currency has been strong of late.

"We are talking about a cut from everyone, including Nigeria and Libya because their production has exceeded the cap in recent months", one source said.


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