Oil producers have to contend with oversupply in 2019, IEA says

Crude Oil

Crude Oil

Inventories at the USA storage hub of Cushing, Oklahoma, delivery point for the oil futures contract, rose more than 1 million barrels from December 11 to 14, traders said, citing data from market intelligence firm Genscape.

International Brent crude oil futures LCOc1 Were at $60.89 per barrel at 0212 GMT, up 69 cents, or 1.15 percent from their last close.

In its closely watched monthly oil market report, the IEA said crude output by OPEC rose by 100,000 barrels a day on month to reach 33.03 million barrels a day in November. OPEC agreed to slash the output by 1.2 million barrels per day from January 1.

Monday's price dip tells us two things, says PVM Oil Associates in London: "Either the 1.2 million bpd reduction in the production of the OPEC+ group is not deemed sufficient by the market, or there are other bearish factors at work". It added that the nation's annualized average output would be 10.88 million bpd over the year.




But the Organization of the Petroleum Exporting Countries and other big producers including Russian Federation said last week they agreed to cut production by 1.2 million barrels per day (bpd). The U.S. government left its forecast for domestic crude production unchanged for 2019 even with prices averaging nearly $11 a barrel lower than its previous estimate. "We envisage a Brent price of $70 per barrel at the end of 2019, and indeed at the end of 2020", said commodities analysts at Commerzbank, in a note. Alberta's plan to boost crude prices through mandatory production cuts is working a little too well, and the price of heavy Canadian crude has more than doubled. Daily oil production stood at 801,000 barrels in November 2018, of which 733,000 barrels accounted for crude oil and 68,000 barrels for condensate, while 6,000 barrels of oil products were exported.

USA crude inventories USOILC=ECI fell by 1.2 million barrels in the week to December 7, compared with expectations for a decrease of 3 million barrels. But that was by much less than the 2.8 million-barrel decline expected by analysts and traders surveyed by The Wall Street Journal.

The publication noted that the main contribution to the growth in supply in 2019 will be made by the USA, Brazil, Russia and the United Kingdom, while Mexico and Norway will demonstrate the strongest decline in production among others. Considering the positive correlation between API and EIA reports, the market is likely to keep crude oil supported before the EIA report.

The agreement will enter into force on January 1, 2019.

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