Concerns about the pace of US supply growth and global demand growth will be the primary impetus behind price moves this year and next, although OPEC will still play an important role.
Quarter-to-quarter, our outlook for OPEC production is nearly unchanged with only a slight downward revision to 2019’s numbers. When it comes to non-OPEC production, all eyes are on the United States. While we still expect a substantial amount of US production growth to occur this year (up 1.1 mmb/d) we do not think volumes will be overwhelming. Overall, we expect non-OPEC production to average 56.9 mmb/d in 2019 and 57.9 mmb/d in 2020. This is higher than last quarter’s estimates based both on growth out of the United States, as well as declining compliance among the OPEC+ signatories to the production agreement. Demand is the other big bogeyman this year, but in fact, we have raised our annual demand estimates for 2019 and 2020 (although by only a minor 100 mb/d each year). While macroeconomic indicators are certainly concerning, there is still no concrete evidence that a slowdown in global growth will meaningfully impact refined products in the short-term.
Overall, these changes to our outlook, combined with the latest fundamental data, indicate looser than expected global balances this year and next. This fundamental oversupply, combined with a lower 2019 starting price, has caused us to lower our 2019 and 2020 price forecasts. Brent has been reduced from $71.47/bbl to $66.76/bbl in 2019. Brent has been reduced from $75.13/bbl in 2020 to an average of $69.46/bbl. WTI has been reduced from a 2019 average of $63.61/bbl to $58.85/bbl. WTI in 2020 has been reduced from an average of $64.57/bbl to an average of $62.86/bbl.
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