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Trade tensions continue to cloud oil outlook: Jadwa Investment

Industry

A new report by capital market firm Jadwa Investment stated that partly as a result of global trade tensions, OPEC now expects to see oil demand growth from the US, China (and India) declining on a yearly basis in 2020

Whereas in 2019, the above three countries’ contribution to yearly demand growth is expected to make up 67 per cent of the total, this will decline to 56 per cent in 2020, the report added.

Jadwa Investment’s report also said OPEC revealed a modest level of global oil demand growth for 2020, in its latest monthly oil report. According to the organisation, next year will see an increase of 1.14 mmbbl per day, which is the same level of growth expected in the full year 2019.

In a recent OPEC (and non-OPEC) meeting, an extension to the voluntary output reduction agreement was confirmed until March 2020.

Based on current OPEC demand and non-OPEC supply forecasts to 2020, it is likely that another roll-over in output will be required until the end of next year and that the level of agreed output may need to be even lower than current levels, the report revealed.

Meanwhile, Brent oil prices are trading just below the US$65 per bbl mark at the moment, similar to levels seen during Q1 2019. Looking ahead, despite rising regional geopolitical tensions, the main factor currently weighing on oil prices remains global trade-related issues, and, more broadly, how such issues are clouding the outlook of the global economy.

Overall, with many non-economic factors directly impacting the outlook on oil, and with Brent oil prices averaging US$66 per bbl so far this year, we have left our forecast for 2019 and 2020 unchanged at US$66 per bbl and US$68 per bbl respectively.

In addition to the above observations, the report includes a discussion on oil demand outlook, OPEC production and oil price forecasts.

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