IEA warns Opec it faces huge oil surplus in 2020
Opec faces a growing surplus in the oil market next year that will push prices lower, the International Energy Agency said on Thursday, in a forecast likely to increase pressure on the Saudi Arabian oil minister to consider deeper production cuts.
The IEA monthly report said that, while the oil market will face a small deficit in the second half of this year, supplies are expected to surge later in 2019 and into 2020.
That will leave supplies outstripping demand for Opec’s crude by approximately 1.4m barrels a day in early 2020, the IEA said, if the group maintains current production levels.
“While the relentless stock builds we have seen since early 2018 have halted, this is temporary,” the IEA said.
“Soon, the Opec+ producers will once again see surging non-Opec oil production with the implied market balance returning to a significant surplus and placing pressure on prices. The challenge of market management remains a daunting one well into 2020.”
The forecast of a large surplus will pose one of the first challenges to Prince Abdulaziz bin Salman, appointed Saudi Arabia’s oil minister at the weekend, who is expected to act as the de facto leader of Opec and its wider alliance with Russia.
He has said there will be no dramatic shift in policy, but the forecast suggests Opec+ may find themselves swamped by rival crude supplies again next year.
Prince Abdulaziz is widely expected to be tasked with boosting the oil price to support Saudi Arabia’s ambitious economic transformation plans and the public listing of state oil company, Saudi Aramco.