US, Brazil, UK to drive non-OPEC crude supply growth in 2019 – OPEC

LONDON (ICIS)–Investment in the US onshore sector, new projects in Brazil and higher output in the UK are likely to drive non-OPEC crude oil supply growth in 2019, although North American transportation bottlenecks continue to complicate the picture, oil cartel OPEC said on Wednesday.

Oil supply growth from non-OPEC countries rose to 2.5m bbl/day in 2018 on the back of higher-than-expected gains in Russia and North America, with US tight oil accounting for 2.13m bbl/day of the total.

Non-OPEC supply growth for 2019 is projected at 2.16m bbl/day, according to OPEC’s November Monthly Oil Market Report, a downward revision of 80,000 bbl/day from the previous month’s estimate.

The downward revision is significantly less than the 400,000 bbl/day non-OPEC production cuts agreed at a summit last week, indicating that the cartel expects productivity increases by some non-OPEC states to outstrip reductions by signatories to the latest deal.

OPEC and 10 non-OPEC partner states agreed crude oil production cuts of 1.2m bbl/day last week, expected to be finalised in January 2019, and initially set to last for six months.

Non-OPEC supply forecasts are difficult to make at present, OPEC added, with factors potentially set to increase or decrease that total.

“The forecast for the next year is subject to considerable uncertainties, particularly with regard to continued improvements in the productivity of US shale, oil transportation bottlenecks in the Permian Basin and Western Canada, and expected projects coming on-stream in other non-OPEC countries,” OPEC said.

Hedge funds and other investors have reduced their long-term positions on Brent and WTI to the lowest levels in over a year on the back of oversupply fears.

Global crude demand growth is expected at 1.29m bbl/day next year, unchanged from OPEC’s estimates last month but down from the projected 1.5m bbl/day increase posted in 2018.

OPEC crude oil demand is expected to stand at 31.4m bbl/day in 2019, around 1m bbl/day down from 2018 estimates.

Pricing remains volatile, dropping to the lowest levels in over a year in November after hitting the highest point since 2014 in October.

The crude oil market’s price downward spiral came as supply expectations and market weakness were exacerbated by trade tensions and hedge fund sell-offs.

Prices have rallied in the days following the latest OPEC accord, with Brent crude futures pricing breaking the $60/bbl barrier.

Pictured: Press conference in Vienna after OPEC and non-OPEC countries agree production cuts,  7 December 
Source: Florian Wieser/EPA-EFE/REX/Shutterstock