Oil market to be in small deficit in 2020
BAKU, Azerbaijan, Jan.7
By Leman Zeynalova – Trend:
Oil market is expected to be in a small deficit in 2020, Trend reports citing the UK-based Capital Economics research and consulting company.
“We think that oil prices will rise further owing to somewhat stronger growth in demand, at a time of subdued supply. On the demand front, the implementation of the IMO 2020 regulations will require higher crude inputs to refineries. And China’s crude demand will continue to be bolstered by state purchases for strategic reserves and by new refinery capacity,” the company said in its outlook.
Turning to supply, Capital Economics suspects that OPEC+ will maintain some form of supply restraint throughout 2020 and that US production growth will slow, given a lack of capital investment.
“All told, we expect the market to be in a small deficit this year and that the price of Brent will reach $75 per barrel by end-2020. The biggest upside risk to our oil price forecast is an escalation in US-Iran tensions. However, even if a military conflict were to ensue, the inevitable surge in prices would reverse quickly as governments draw down stockpiles, supply networks adjust and demand falters in the wake of high prices,” reads the report.
Taking this all together, signs of life in the global economy should give a lift to investor risk appetite and, in turn, commodity prices, according to Capital Economics.
“However, we think much will depend on the supply outlook for individual commodities. As a result, we forecast that there will be upward pressure on the price of oil and many metals prices, but that high stocks will act as a lid on the prices of many agricultural commodities.”
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