A small deficit in the second half of 2019 will transform into a surplus in 2020 as more and more oil will hit the market. Iran and American shale oil producers are the usual suspects responsible for the oversupply. OPEC+ will also have a hard time discussing the future of the production cuts agreement that will expire in March 2020 as surging non-OPEC oil production might discourage some countries from further cuts.
However, the surplus will continue growing even if the group of major oil producers, which includes Russia, maintain their production at current levels until 2020.
Brent crude, the international oil benchmark, has recovered from Thursday’s low of $58.92 to trade at $60.43 at the time of writing. The US benchmark WTI has settled at $55.20, off the recent low of $54.01. While the upside correction is a clear possibility in the near future, the long-term perspectives remain dim and unfriendly.