Top Oil Traders See 2020 Prices Stuck in the $50s

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Top Oil Traders See 2020 Prices Stuck in the $50s

 

(Bloomberg) -- As the oil industry’s top executives gathered in London for one of the most important events of the year their view on crude prices was clear: they’ll struggle next year.

Vitol SA Chief Executive Officer Russell Hardy told the Oil & Money conference on Wednesday that the ongoing U.S.-China trade dispute was curbing the outlook for crude prices which would be stuck in the $50s a year from now. The bosses of fellow commodity traders Trafigura Group Ltd. and Gunvor Group Ltd. agreed, at least in the short term.

“Without some resolution to the trade wars then we’ll remain a little bearish,” said Hardy.

For months, the oil market has been focused on a worsening demand outlook and trade tensions between the world’s two biggest economies with the bearish mood only briefly pierced by attacks on Saudi Arabia’s energy infrastructure.

Trafigura CEO Jeremy Weir said the trading house expects a slight recovery in the fourth quarter of 2019 with prices “maybe slightly lower from where we are now” in a year’s time.

“Particularly with the current trade environment and a strong U.S. dollar, I would say there’s further downside in the short term,” said Weir.

Gunvor CEO Torbjorn Tornqvist said he also sees oil at current levels, of under $60 a barrel, a year from now and that next year the market would “test OPEC’s resolve” on its commitment to coordinated output cuts. The current production cuts deal, agreed by the Organization of Petroleum Exporting Countries and its allies, is due to expire in March 2020.

Analysts at the conference echoed the view of trading houses, saying they saw the oil market remaining amply supplied next year.

Jeffrey Currie, head of commodities research at Goldman Sachs Group Inc., sees Brent crude at $60 over the next two years. The market is pricing in plenty of supply and demand is a concern, Jan Stuart, global energy economist at Cornerstone Macro LLC added.

After a strong start to the year, Brent oil reversed direction in late April and has lost around 22% since then. The global benchmark was just below $58 a barrel in early trading in Asia on Thursday.

Missing Geopolitical Risk

Royal Dutch Shell Plc boss Ben van Beurden however said he was surprised prices weren’t higher than current levels, following the worst-ever attack on Saudi Arabia’s energy infrastructure last month.

“It’s a but puzzling in a way but shows how good the response of Saudi Aramco has been,” van Beurden told Bloomberg TV on Wednesday. “The market is a little bit anesthetized by trade wars and the glut of shale to the point where it has become blase about geopolitical risk. I think it’s not representative of the real picture.”

Gunvor’s Tornqvist agreed, adding that it seems that there is currently no risk premium on oil prices.

“It’s amazing that prices are at low-end of where they were before attack,” Tornqvist said.

Saudi Aramco CEO Amin Nasser said the kingdom may beat its end-of-November target to restore output capacity to 12 million barrels a day, having already reached pre-attack production levels. The company is targeting production of around 9.9 million barrels a day for October.

“We made sure customers received shipments even during the attacks,” Nasser said.

“Five years ago the market reaction would’ve been bigger,” Shell’s van Beurden said in the Bloomberg TV interview. “The geopolitical risk premium is low in market now. “The unthinkable may happen again and we should factor that in.”

Underinvestment

But over the longer-term, oil executives see crude prices rising because of a lack of investment now in new projects. Gunvor’s CEO said prices could reach between $70-$80 a barrel in five years without the right investment.

“If we do not invest today, prices could go there. It is cyclical. Prices will respond to the level of investment over time. Putting off long-term investment is a concern,” Tornqvist said.

 

[Guest]

6 hours ago, ceo_energemsier said:

Gunvor CEO Torbjorn Tornqvist said he also sees oil at current levels, of under $60 a barrel, a year from now and that next year the market would “test OPEC’s resolve” on its commitment to coordinated output cuts. The current production cuts deal, agreed by the Organization of Petroleum Exporting Countries and its allies, is due to expire in March 2020.

Should be interesting in April ... 

[ceo_energemsier + 1,818]

9 minutes ago, DayTrader said:

Should be interesting in April ... 

Their deal may not get extended ....

[ceo_energemsier + 1,818]

Saudi Arabia says its oil output fell 660,000 bpd in Sept after attacks

 

LONDON, Oct 10 (Reuters) - Saudi Arabia, the world's largest oil exporter, told OPEC that the kingdom's oil production in September fell by 660,000 barrels per day (bpd) compared with August to 9.13 million bpd in the wake of attacks on its energy installations.

Secondary sources said Saudi Arabia's oil production was even lower, falling month-on-month in September by 1.28 million bpd to 8.56 million bpd, OPEC's monthly report showed.

The Sept. 14 attacks targeted two of state oil giant Saudi Aramco's plants, initially knocking out half of the kingdom's oil production — 5% of global output.

The Organization of the Petroleum Exporting Countries said that in September the group's overall production was 1.32 million bpd lower month/month at 28.49 million bpd.

OPEC, in the report, lowered its forecast for non-OPEC supply growth in 2020 by 50,000 bpd to 2.2 million bpd, due to downward revisions for Kazakhstan and Russia.

But the Vienna-based group left unchanged its 2020 forecast for global oil demand growth at 1.08 million bpd.

OPEC trimmed its forecast for world economic growth in 2020 to 3% from 3.1%, saying "it seems increasingly likely that the slowing growth momentum in the U.S. will carry over to 2020"

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UPDATE 1-Russia and Saudis to talk oil, $2 bln of deals during Putin visit - wealth fund

MOSCOW, Oct 10 (Reuters) - Russia and Saudi Arabia will sign more than $2 billion of deals and discuss the OPEC+ oil output agreement during President Vladimir Putin's first visit to the kingdom in more than a decade next week, a senior official said on Thursday.

Putin's visit to Riyadh on Monday comes as Russia is trying to expand its political and commercial clout in the Middle East. Riyadh and Moscow - the top two oil-exporting powers - have also been cooperating on curbing global oil output since 2016.

"This is a historic visit and it emphasises the important role of Russia as a player that brings stability to the region," the head of Russia's RDIF sovereign wealth fund, Kirill Dmitriev, told reporters.

"The OPEC+ deal will also be discussed during the meetings," he added.

The two oil-exporting powers plan to sign 10 deals during Putin's first visit to Saudi Arabia since 2007, in sectors including agriculture, railways, fertilisers and petrochemicals, Dmitriev said.

One of the deals will be worth $700 million and RDIF will also announce a joint investment with Saudi Arabia's state oil giant Saudi Aramco, he added.

Moscow is also the world's largest wheat exporter and has long sought access to the Saudi and broader Middle Eastern and North African markets.

It made some progress in August when Saudi Arabia agreed to relax its specifications for wheat imports, opening the door to Black Sea imports.

Dmitriev said a number of petrochemical projects would be discussed during the visit, and Moscow was cooperating with Aramco on the issue.

"We will continue to promote (Russia's largest petrochemicals company) Sibur's project in Saudi Arabia with the participation of Saudi Aramco, Total," he added.

He said Russia and Saudi Arabia were also working on another 25 projects worth $10 billion, along with other ongoing projects without going into details.

"We will continue to move forward. We believe that strategic relations with Saudi Arabia are extremely important because we are interested in a stable oil market, a stable region and large-scale joint investments," he added.

 

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OPEC chief says deeper oil cut an option amid weaker 2020 outlook

 

 

LONDON (Reuters) - A deeper cut in oil supplies is among options for OPEC and its allies to consider in December, its secretary general said on Thursday as the producer group's forecasts pointed to slower global growth and lower demand next year.

OPEC, Russia and other producers, an alliance known as OPEC+, have since January implemented a deal to cut oil output by 1.2 million barrels per day to support the market. The pact runs to March 2020 and the producers meet to set policy on Dec. 5-6.

"The conference will take appropriate, strong, positive decisions that will set us on the path of heightened and sustained stability for 2020," Mohammad Barkindo told reporters at a briefing in London.

"All options are open," he said, when asked about the prospect of a deeper oil supply cut.

Oil prices have failed to gain a lasting boost from supply disruptions this year, including the attack last month on Saudi Arabian oil installations that briefly shut down more than half of production in the world's top exporter.

Brent crude was trading near $58 a barrel, down from a 2019 high near $75 in April. Concern about weaker economies and demand due to uncertainties such as Brexit and the U.S.-China trade dispute have overshadowed lower supply.

While the last meetings of the Organization of the Petroleum Exporting Countries and its allies in July decided on supply for the next nine months, the next meeting in Vienna will likely take a longer view.

"As we approach December, we will be faced with real data for 2020 which will enable us to probably review the current arrangement and come up with a decision that probably will cover the whole of the year," Barkindo said.

OPEC separately released its October monthly oil market report on Thursday in which it trimmed its forecast for world economic growth in 2020 to 3% from 3.1%, saying "it seems increasingly likely that the slowing growth momentum in the U.S. will carry over to 2020".

Barkindo, speaking to reporters on the sidelines of the annual Oil & Money conference, sounded a more upbeat tone, saying data on 2020 was preliminary and could surprise to the upside.

 

LOWER 2020 DEMAND

In a forecast that could press the case for further supply restraint in 2020, OPEC continues to see a drop in demand for OPEC crude next year due to higher supply from rivals such as the United States.

Global demand for OPEC crude will average 29.6 million bpd, OPEC said in the report, a drop of 1.2 million bpd from 2019. Should OPEC keep pumping at August's rate - the level before the Saudi attacks - that implies a surplus of about 200,000 bpd.

OPEC said that in September the group's production was 1.32 million bpd lower month-on-month at 28.49 million bpd, largely due to the Saudi attacks.

Saudi Arabia has stressed that it restored output quickly, but told OPEC that its production in September fell by 660,000 bpd from August to 9.13 million bpd.

Secondary sources that OPEC uses to monitor its output said Saudi production was even lower, falling by 1.28 million bpd to 8.56 million bpd.

OPEC left unchanged its 2020 forecast that global oil demand would grow in 2020 by 1.08 million bpd.

Supply from non-OPEC producers will expand by a much faster 2.2 million bpd even after a downward revision in Thursday's report, keeping up the pressure on OPEC and its allies to avoid a larger surplus next year.

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IEA lowers oil demand growth forecasts for 2019, 2020

In its latest Monthly Oil Market Report, the International Energy Agency reduces its oil demand forecasts for 2019 and 2020, both by 100,000 b/d, to a respective 1 million b/d and 1.2 million b/d.

 

 

Oct 11th, 2019

In its latest Monthly Oil Market Report, the International Energy Agency reduces its oil demand forecasts for 2019 and 2020, both by 100,000 b/d, to a respective 1 million b/d and 1.2 million b/d.

For 2019, the reduction mainly reflects a technical adjustment due to new data showing higher US demand in 2018 which has depressed this year’s growth number. For 2020, the reduction reflects a lower global gross domestic product outlook.

According to IEA, demand for this year is seeing two very different halves. In the year’s first half, demand expanded by 425,000 b/d year-over-year, which is the weakest demand growth since the latest recession. For the second half of this year, however, IEA is projecting demand growth of 1.57 million b/d with recent data lending support to the outlook: non-OECD (Organization for Economic Cooperation and Development) demand growth in July and August was 1 million b/d and 1.5 million b/d, respectively, with Chinese demand growing solidly by more than 500,000 b/d year-over-year. The OECD countries remain in a relatively weak state, although year-over-year growth returns through this year’s second half, helped by a comparison vs. a low base in the latter part of 2018. Demand also is supported by prices (Brent) that are more than 30% below year-ago levels.

For 2020, IEA’s oil demand outlook is cut back to a still solid 1.2 million b/d due to a weaker GDP growth forecast.

The economic outlook used in this month’s report has been revised downward following the publication of the OECD Interim Economic Outlook on Sept. 19. The organization reduced its projections of world economic growth for 2019 to 2.9% from 3.2% and for 2020 to 3% from 3.4%. The main factors behind the downgrade are uncertainty due to trade disputes and the impact of the UK’s exit from the European Union.

EIA said, “Investment growth has decreased in the G20 economies from 5% at the start of 2018 to 1% in the first half of 2019 and demand for certain durable consumer goods, e.g. cars, has collapsed. Tensions are also reducing trade volumes, and the World Trade Organization now expects trade volumes to increase by only 1.2% in 2019. The slowdown in trade volumes has already affected bunker deliveries. It has also had a strong impact on truck transportation and thus diesel consumption.”

Supply

Global oil supply plunged 1.5 million b/d in September to 99.3 million b/d after attacks on Saudi oil facilities, the steepest month-on-month decline in more than a decade.

 

 

Saudi officials say production capacity has recovered to 11 million b/d and they expect a return to the pre-attack level of 12 million b/d by the end of November. A full restoration could, however, prove ambitious given the amount of time required to source and install equipment, according to IEA.

Non-OPEC supply eased 400,000 b/d month-over-month in September, partly reversing August’s stronger than expected 930,000 b/d monthly gain. A seasonal decline in biofuels supply and lower production in Canada, Norway, Russia, and Kazakhstan made up most of the September decline. Higher US oil output provided a partial offset.

At just over 65 million b/d, total non-OPEC oil supply was nevertheless 1.6 million b/d higher than a year ago. Annual growth came primarily from the US—despite a slowdown in activity since the start of the year—and from Brazil where output has surged in recent months on the start-up of new production units. Additional gains came from biofuels and LNG projects in Australia.

For all of 2019, non-OPEC supply growth is largely unchanged at 1.8 million b/d as a slightly weaker outlook for the US is offset by improved expectations for Australia and China.

While the pace of the US expansion eases further in 2020, total non-OPEC supply growth accelerates to 2.2 million b/d, with marked gains also coming from Brazil and Norway, where the start-up of the giant Johan Sverdrup field in early October will underpin a 370,000 b/d increase next year.

OECD stocks, refining

OECD industry stocks built 20.8 million bbl month-over-month in August to 2,974 million bbl—the fifth straight monthly increase. They reached the highest level since September 2017 and were 43.1 million bbl above the 5-year average. The gain was in line with the usual increase of 19.2 million bbl for the month. On a forward demand basis, stocks were 0.6 days lower than the 5-year average of 62.2 days.

Specifically, crude oil inventories fell by 14.4 million bbl to 1,098 million bbl while stocks of oil products rose by 32.5 million bbl to 1,514 million bbl.

Preliminary data for September showed stocks falling in all three OECD regions and by 21.7 million bbl overall. US crude oil stocks increased counter-seasonally by 1.9 million bbl due to strong production and reduced refinery runs. Total oil product inventories drew by 3.6 million bbl.

Floating storage of crude oil rose by 1.8 million bbl in September to 70.1 million bbl. The number of Iranian vessels used for storage was unchanged from the previous month.

In this year’s third quarter, global refining throughput continued the recent pattern of decline, falling by 500,000 b/d year-over-year and reducing IEA’s annual growth forecast to just 150,000 b/d—the lowest in 10 years.

 

However, global refinery throughput is expected to return to growth in this year’s fourth quarter and stay elevated throughout 2020 as refined products demand growth accelerates to 800,000 b/d—the highest rate since 2017. In 2020, throughput is expected to increase by 1.2 million b/d.