Oil prices to average $62.50 in 2020 as oversupply to persist

Uncertainty over global economic and oil demand growth will continue to weigh on oil prices next year as the oversupply in the market will likely persist, the monthly Reuters poll of economists and analysts showed on Friday, per an oilprice.com report by Tsvetana Paraskova.

According to 42 experts, Brent Crude will average $62.50 per barrel in 2020, just slightly up from last month’s poll by Reuters, in which analysts predicted an average price of $62.38 for the international benchmark next year, Tsvetana Paraskova reported.

The economists expect WTI Crude to average US$57.30 a barrel next year, also slightly up from last month’s $56.98 estimate.

At 07:36 a.m. EDT on Friday, WTI Crude was down 0.15 percent at $58.02 and Brent Crude was trading down 0.62 percent at $62.88.

The analysts expect weak demand growth in the first half of 2020 due to weak economic growth. On the other hand, most agree that there is too much oil in the market. Demand growth could be anywhere in the range of 800,000 bpd to 1.4 million bpd, according to the experts surveyed by Reuters.

Next year, oil demand growth is expected to pick up from this year’s lower growth pace, but oil supply from producers not part of the OPEC+ coalition—such as the United States, Brazil, and Norway—is seen growing faster than the rise in demand, and offsetting efforts of the cartel and its allies to rebalance the market.

The International Energy Agency (IEA) sees non-OPEC countries adding another 2.3 million bpd to their supply in 2020, while global oil demand growth is expected at 1.2 million bpd.

In the Reuters poll a week before the OPEC+ meeting in Vienna, most experts expect OPEC and its non-OPEC partners led by Russia to decide next week to roll over the cuts, but deeper cuts are unlikely, because OPEC’s leader Saudi Arabia would not be willing to sacrifice additional market share than it has already done.

Russia is expected to continue playing along, but will still be busting its production cap, Caroline Bain, analyst at Capital Economics, told Reuters.