On Tuesday, JP Morgan raised its oil price outlook and forecast supply and demand balance to tighten next year against the backdrop of the OPEC and its allies increasing output cuts and stronger economic growth in emerging markets. According to Reuters, the intergovernmental organization reviewed its Brent price forecast of $64.5 per barrel in 2020 from $59 earlier, although prices are expected to slip to $61.50 in 2021. West Texas Intermediate are observed to be following a similar path with prices averaging $60 per barrel in 2020 and $57.50 in 2021.
According to JP Morgan, the end of UK electoral conflicts, the U.S.-China trade truce along with the fall of peculiar and individual headwinds in some of the immensely emerging markets economies improved the outlook for global growth for next year. The bank also said “In contrast to our September forecast that the global oil market will be in surplus of 0.6 million barrels per day (mbpd) on average for 2020, we now estimate the market will be in deficit of 0.2 mbpd,” The OPEC, Russia and other producers, a group known as OPEC+, agreed to cut output by an extra 500,000 barrels a day in the first quarter of 2020. Oil prices remained around a three-month high on Tuesday on hopes that a full-fledged U.S.-China trade deal is in the work and set to stoke oil demand in the world’s biggest economies.
Brent started trading up to 1.24% on Tuesday, at $66.15 per barrel as the US China trade deal progress revived the oil market. It is the highest price point since the September attacks on Saudi Aramco infrastructure that took over 5 million bpd off the oil markets. WTI was also trading up by 1.25%, at $60.96.
However, with production increasing to 12.9 million bpd over the last few weeks, up from 11.7 million bpd at the beginning of the year, the threat of rising U.S production was concerning to most OPEC cooperating countries, saying it expected bigger OPEC production cuts. U.S president Donald Trump said to reporters in London, “I have no deadline, no. In some ways, I like the idea of waiting until after the election for the China deal.” Saudi Arabia is pushing the plan to deliver a positive surprise to the market before the IPO of state-owned Saudi oil supplier, Aramco.
In the meanwhile, a senior official at the International Energy Agency (IEA) on Tuesday said that OPEC producers are not likely to agree to change their current deal on curbing output until the market outlook becomes clearer. Russian Energy Minister Alexander Novak said on Tuesday that he expected this week’s meeting to be constructive but added that Moscow had yet to finalize its position. Vagit Alekperov, CEO of Russia’s second-biggest oil company, Lukoil, said it would not be hasty to deepen production cuts in the winter, especially regarding Russia. OPEC ministers will meet in Vienna, Austria on Thursday. The wider OPEC+ group meet on Friday.