Oil Market in 2019
Preliminary data indicates that global oil supply decreased by 0.35 mb/d to average 100.02 mb/d in December 2018, compared with the previous month. The share of OPEC crude oil in total global production declined by 0.6% to 31.6% in December compared with the previous month. This is in contrast with the World’s Oil Demand which was estimated at 98.78 mb /d for year 2018 indicating the persistent supply overhang largely from US. Total World Oil Demand is forecasted to increase to 100 mb / throughout 2019 though and these increase would be absorbed by increasing US production while OPEC supply is expected to decrease in order to balance.
However, the journey to a balanced market will take time, and is more likely to be a marathon than a sprint. While Saudi Arabia is determined to protect its price aspirations by delivering substantial production cuts, there is less clarity with regard to its Russian partner. Data show that Russia increased crude oil production in December to a new record near 11.5 mb/d and it is unclear when it will cut and by how much. Other non-OPEC countries joining in the output deal saw higher output, including Mexico.
Elsewhere, there are signs that market re-balancing will be gradual. The trajectory of Iran’s production and exports remains important. In December, total exports increased slightly to over 1.3 mb/d. With US waivers allowing Iran’s major customers to buy higher volumes than was previously thought, more oil will remain in the market in the early part of 2019. Venezuela has seen the collapse of its oil industry slow during the second half of 2018 with production falling recently by about 10 kb/d each month rather than by the 40 kb/d we saw earlier in the year. The level of output in the world’s biggest liquids producer, the United States, will once again be a major factor in 2019. We saw incredible and unexpected growth in total liquids production of 2.1 mb/d in 2018. For this year, we have left unchanged for now our forecast for growth of 1.3 mb/d. While the other two giants voluntarily cut output, the US, already the biggest liquids supplier, will reinforce its leadership as the world’s number one crude producer. By the middle of the year, US crude output will probably be more than the capacity of either Saudi Arabia or Russia.
For oil demand, there is a mixed picture. Falling prices in 4Q18 helped consumers and there are signs that trade tensions might be easing. In many developing countries, lower international oil prices coincide with a weaker dollar as the likelihood of higher US interest rates fades for now. However, the mood music in the global economy is not very cheerful. Confidence is weakening in several major economies. In the short term, there is added uncertainty about oil demand due to the onset of the northern hemisphere winter season, with low temperatures seen in the past few days in many places. For now, we retain our view that demand growth in 2018 was 1.3 mb/d, and this year it will be slightly higher at 1.4 mb/d, mainly due to average prices being below year-ago levels.
In the meantime, refiners face a challenging year. Processing capacity will increase by 2.6 mb/d, the biggest growth for four decades, while margins are already pressured by low gasoline cracks due to oversupply and weak demand. The well-trailed changes to the International Maritime Organisation’s marine fuel regulations due in 2020 are another big issue for some refiners as they seek to find outlets for unwanted high sulphur fuel oil. By the end of the year, all industry players, upstream and downstream, may feel as if they have run a marathon.https://straitsjournal.com/oil-market-in-2019/EnergyGlobalOil & GasPowerPreliminary data indicates that global oil supply decreased by 0.35 mb/d to average 100.02 mb/d in December 2018, compared with the previous month. The share of OPEC crude oil in total global production declined by 0.6% to 31.6% in December compared with the previous month. This is in contrast...escveritas [email protected]AdministratorThe Straits Journal