Global Oil Market Outlook for 2020 - OPEC
Global economic growth is expected to remain at 3.2% in 2020. While the US and China are forecast to slow slightly, some severely hit economies mainly in Latin America and Turkey are forecast to recover, keeping the GDP growth momentum unchanged from the 2019 level. In the OECD, growth is forecast to slow to 1.6% in 2020, down from 1.7% in 2019, due to ongoing challenges in several key OECD economies and despite counter-balancing developments within the region. In the emerging economies, China is forecast to experience slower growth, while momentum in India and Brazil is expected to pick up. Meanwhile, Russia’s growth is forecast to remain at the 2019 level. The 2020 forecast assumes that no further down-side risks materialize, particularly that trade-related issues do not escalate further. Growth risks also include ongoing challenges in several emerging and developing economies. High debt levels could pose serious challenges to the countries affected, not only due to limitations in fiscal space, but also if their credit ratings worsen. Brexit poses an additional risk, as does a continuation in the current slowdown in manufacturing activity. While further increases in US-China trade tariffs have been postponed, other trade-related uncertainties remain.
World oil demand in 2020 is forecast to grow by 1.14 mb/d YoY, in line with the current year estimates. The OECD is forecast to grow by 0.09 mb/d next year, with only OECD Americas showing positive growth, while OECD Europe and Asia Pacific are anticipated to continue to decline. In the non-OECD, oil demand is expected to increase by around 1.05 mb/d. Other Asia is projected to be the largest contributor to incremental oil demand in 2020, followed by China, which is forecast to be lower than in the current year. The transportation sector is anticipated to lead growth on strong demand for motor and aviation fuels. Demand from the petrochemical sector will remain strong, although it will ease slightly in the US due to lower ethane cracking capacity additions. Factors that could influence the pace of oil demand growth in 2020 include macroeconomic developments in major consuming countries, the displacements of heavy distillates with natural gas and other fuels, subsidy programmes and plans for their removal, the effect of commissioning/delays/closures of mega projects in the downstream and fuel efficiency programmes, especially in the transportation sector.
Non-OPEC oil supply is forecast to grow by 2.4 mb/d in 2020, higher than in the current year. This is mainly due to the debottlenecking of oil infrastructure in North America and new project ramp ups in Brazil, Norway and Australia. In contrast, natural decline in Mexico, Indonesia, Colombia and Egypt is foreseen to offset some of this growth. US tight crude production is anticipated to continue to grow as new pipelines will allow more Permian crude to flow to the US Gulf Coast export hub. More than 2.5 mb/d of new pipeline capacity in the Permian is expected to become operational by July 2020. Investment by exploration and production (E&P) companies in the US is expected to reach around USD 180 bn next year, with the tight oil sector forecast to spend some USD 124 bn.
Meanwhile, non-OPEC supply growth is expected to be supported by startups of a number of fields in 2020, including Norway’s Johan Sverdrup as well as assets in Lula, Lapa, Lara and the Buzios fields in Brazil. However, factors such as the drive for capex discipline, geopolitical tensions, unplanned outages, extended field maintenance, delays in infrastructure debottlenecking, as well as oil price developments will remain the key uncertainties affecting supply growth.
Source : Strategic Research Institute