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Oil Analysts See Few 2020 Fireworks as OPEC+ Cuts Trim Surplus


By Mike Jeffers

(Bloomberg) Oil prices are likely to remain in check during 2020 as OPEC+ production cuts are offset by higher output from other countries and a mixed outlook for demand, according to analysts.Analysts see prices climbing higher in the middle of the year as stronger emerging-market demand and the OPEC+ cuts trim global inventories. Saudi Arabia surprised the market in early December with a deeper supply cut, which, along with signs of a thaw in the U.S.-China trade conflict that may boost demand, lead some prominent analysts to revise their forecasts higher.Goldman Sachs Group Inc. increased its estimate for Brent crude to $63 a barrel from $60, according to a note from analysts including Damien Courvalin and Jeff Currie. “This points to a tighter inventory path than we previously expected, especially through first-half of 2020.”West Texas Intermediate will average $58.50 a barrel in 2020, according to the median of analyst estimates compiled by Bloomberg since the OPEC+ meeting in early December. That compares to the current level of around $60 and the average so far in 2019 of $56.95. Brent is forecast to average $64.25 a barrel.

1Q 2020 2Q 2020 3Q 2020 2020 2021
WTI $57.00 $58.00 $58.00 $58.50 $57.50
ICE Brent $62.00 $64.00 $64.00 $64.25 $60.00

The forward curve is in backwardation, with spot prices for WTI about $4 a barrel and Brent about $5.25 a barrel higher than December 2020 contracts. That premium for near-term delivery comes as producers sell forward contracts to hedge their output for the next couple of years and as inventories are seen as likely to decline.

Additional analyst comments:
  • JPMorgan Securities LLC analysts including Abhishek Deshpande see Brent averaging $64.50 a barrel. Stronger emerging market growth prompted the bank to tighten its oil balance in 2020 by 300,000 barrels a day compared with a 100,000 barrel-a-day surplus previously, according to a Dec. 17 note. The bank also cited Petrobras’s recent reduction of its production guidance for next year.
  • Michael Tran and Helima Croft at RBC Capital Markets see Brent at $64 a barrel, noting inventories are tighter than anticipated, signaling that supply from Johan Sverdrup in Norway and Guyana “are and will be absorbed with relative ease.”
  • Rystad Energy predicts that North American shale oil supply will continue to grow. “In spite of the decline in spending and activity levels, the North American shale supply is not following the downward trend,” said Sonia Mlada Passos, an oil analyst at Rystad Energy AS.


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