Looking at the fundamentals in its recently published monthly oil market report, OPEC might have to deepen its cuts to balance the market in 2020 as bearish factors combine, including stubbornly high non-OECD stocks and steady supply from the United States even with downward revisions.
Presumably traders took heart of the disclosure earlier this week by the Organization of the Petroleum Exporting Countries (OPEC) that while demand for its crude next year would be 1.12 million bpd less than in 2019, the 2020 surplus would be far less than originally feared at a paltry 70,000 bpd.
OPEC Secretary General Mohammad Barkindo had painted a more upbeat picture earlier this week, saying growth in rival US production would slow in 2020, although a report by the group had also said demand for OPEC oil was expected to dip. Production for the cartel was up in October from September, as Saudi Arabia regained its footing after the attacks on Aramco oil infrastructure and as Venezuela managed to pull a rabbit out of its hat, increasing production to 687,000 bpd in October from 644,000 bpd in September. In July, the alliance, known as OPEC+, renewed the pact until March 2020.
"The calmness is supported by a well-supplied market and high inventories", said the Paris-based agency, which advises most major economies on energy policy.
USA crude production in 2020 will grow by 1.02 million b/d year on year to average 13.20 million b/d, it said.
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The agency kept its assessments for growth in global oil demand in 2019 and 2020 at 1 million bpd and 1.2 million bpd respectively, but said its outlook might slightly underestimate the impact of tariffs from the U.S.
Blistering growth in shale fields propelled USA crude output to a record 13 million barrels per day (bpd) this month.
Since OPEC and its allies agreed on production cuts in late 2016, there have been diverging trends in OECD and non-OECD stocks.
USA total commercial oil stocks fell by 17.3 million barrels to stand at 1.28 billion barrels in October, according to preliminary data.
Oil prices were steady after the report's release, trading near $63 a barrel, below the level some OPEC officials say they favour.