OIL PRODUCERS VOW TO KEEP CRUDE SUPPLY IN CHECK

The Organization of the Petroleum Exporting Countries (OPEC) and its allies have worked in tandem last year to ensure oil prices remained robust, and they are widely expected to continue supporting oil markets in 2020 amid continued global oversupply.

In December, OPECand non-OPEC countries decided on an additional reduction of 500,000 barrels per day (bpd), which would lead to total adjustment of 1.7 million bpd.

“In addition, several participating countries, mainly Saudi Arabia, will continue their additional voluntary contributions, leading to adjustments of more than 2.1 million bpd,” OPEC said in a press release.

OPEC crude prices rose 31.8% in 2019 to reach just under USD 68 per barrel by the end of December.

Benchmark Brent crude is forecast to average USD 63.07 per barrel in 2020, up marginally from last month’s USD 62.50 estimate, a survey of 38 economists and analysts showed. OPEC expects non-OPEC oil supply to grow by 2.17 million bpd for an average of 66.46 million bpd, on the back of growth in the US, Brazil, Norway, Canada, Australia, Russia and Kazakhstan.

“The 2020 non-OPEC supply forecast remains subject to many uncertainties, mainly the trend of investment discipline by US independents, the timing of debottlenecking of pipeline constraints in Canada, drilling and completion activity in the US, and Mexico’s efforts to overcome natural decline,” OPEC noted.

The International Energy Agency sees total US oil production growth slipping to 1.1 million bpd in 2020 from 1.6 million bpd in 2019. US output growth rate has been declining as producers reduced the number of oil rigs operating for a fourth quarter in a row for the first time since 1999.

Meanwhile, global oil demand rose a moderate 0.98 million bpd in 2019, as macro-economic indicators cooled in major economies. Growth mainly came from Asia Pacific and the Americas, while most developed economies saw muted expansion.

“In 2020, global oil demand is expected to grow by 1.08 million bpd, with the OECD growing by 0.07 million bpd. OECD Americas is anticipated to be the only OECD region in positive demand growth territory next year, supported mainly by petrochemical capacity additions,” OPEC said in its latest report.

In the non-OECD region, oil demand growth is projected to be around 1.01 million bpd, with growth projected to improve in Other Asia, Latin America and the Middle East. Indeed, the transportation and petrochemical sectors are expected to continue leading oil demand growth in 2020.

Oil’s prospects look brighter as the International Monetary Fund expects growth to pick up to 3.4% in 2020 on the back of improved economic performance in a number of emerging markets in Latin America, the Middle East, and emerging and developing Europe.

“Yet, with uncertainty about prospects for several of these countries, a projected slowdown in China and the United States, and prominent downside risks, a much more subdued pace of global activity could well materialise,” the IMF said.

Saudi Aramco enjoyed an impressive listing debut on the Saudi Tadawul in December, ending the year 10% higher than its debut to emerge as the world’s most valuable listed company with market cap of SAR 1.88 trillion.

Aramco’s production in November stood at 9.85 million bpd, slightly higher than its third quarter average of 9.45 million bpd. In December, Saudi Arabia and Kuwait also said they had planned to resume production at the two fields in the Saudi-Kuwaiti Partitioned Zone. The fields will produce around 320,000 bpd by the end of 2020, according to Reuters.

“With the signing of this new accord, both parties have reached consensus that now is the right time to resume production in this zone,” Saudi Aramco president and chief executive Amin Nasser said in a statement.

The company also continues to boost its all-round integrated production capacity and completed, through its subsidiary Aramco Overseas Company B.V., the acquisition of 17% of Hyundai Oilbank from Hyundai Heavy Industries Holdings, for approximately USD 1.2 billion.

“The investment in South Korea’s Hyundai Oilbank supports Saudi Aramco’s downstream growth strategy of expanding its global footprint in key markets in profitable integrated refining, chemicals and marketing businesses which enable Saudi Aramco to place crude oil and leverage its trading capabilities,” Aramco said in a statement.