The Organization of the Petroleum Exporting Countries (OPEC) and its partners should expect lower demand for their oil next year as increasing output from rivals eats up their market share, the International Energy Agency (IEA) has said.
“The OPEC+ countries face a major challenge in 2020 as demand for their crude is expected to fall sharply,” a Reuters report citing IEA stated.
IEA estimates the demand for crude oil from OPEC in 2020 at 28.9 million bpd, which is 1 million bpd below the bloc’s current production.
Meanwhile, non-OPEC supply is expected to grow to 2.3 million barrels per day (bpd) next year up from 1.8 million bpd in 2019 on the back of increased production from United States, Brazil, Norway and Guyana.
“The US will lead the way but there will also be significant growth from Brazil, Norway and barrels from a new producer, Guyana,” the energy watcher said.
Brent gained 0.77 percent and WTI rose 0.78 percent on Friday. The pessimist outlook for 2020 comes ahead of a December meeting of OPEC+, who would have to decide on a solution.
However, IEA believes the hefty supply cushion that is likely to build up during the first half of next year will offer cold comfort to the OPEC+ ministers gathering in Vienna next month.
A decline in sales of crude would be telling on Nigeria which proposes a budget of N10.33trn in 2020 hinged on a $57 per barrel oil benchmark price and an output of 2.18 million bpd.
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Nigeria’s reliance on oil for government revenue and rising debt cost have been a major cause of worry for the country which is growing less than its natural rate by at least 3 percent.
The IEA also said global demand for oil grew by 1.1mbpd in the third quarter, up from 435,000 barrels a day in the second quarter.
The surge was majorly due to the 640,000 barrels increase from China compared to the year before.
The outlook is that global growth will be 1.9 million barrels per day year-on-year for the final quarter of 2019.
On the supply side, production grew by 1.5 million barrels per day in October following a recovery of Saudi Arabia’s output after a drone attack on its biggest oil facility.
IEA also noted contributions from Norway, Canada and the US. However, OPEC crude production fell 2.5 million year-on-year to 29.9 million barrels a day.
