Oil is set for its biggest weekly decline in nearly two months as the International Energy Agency warned of a looming supply glut.
Futures fell 0.3% in New York, down 2.8% for the week. The Organization of Petroleum Exporting Countries and its allies face a significant challenge in managing the market in 2020 as production surges from their competitors, according to the IEA. While OPEC+ didn’t discuss deepening its output curbs in Abu Dhabi on Thursday, it put pressure on members to implement their promised cuts in an effort to avoid a supply surplus.
Oil slid this week after U.S. President Donald Trump was said to discuss moderating sanctions on Iran, with RBC Capital Markets estimating an easing of the standoff could bring back around 700,000 barrels a day of crude. Saudi Arabia’s newly appointed Energy Minister Prince Abdulaziz bin Salman downplayed demand concerns on Thursday and said that talks of deeper output cuts is possible at OPEC’s next ministerial meeting in December.
“An increasingly heavy balance for 2020, along with the risk of possibly more leniency on Iran with sanctions is weighing on sentiment,” said Warren Patterson, head of commodities strategy at ING Bank NV. “OPEC was never going to announce deeper cuts now, I think that will only happen in December, unless they are forced before then by a selloff.”
West Texas Intermediate crude for October delivery lost 16 cents to $54.93 a barrel on the New York Mercantile Exchange as of 10:54 a.m. London time. Brent for November dropped 19 cents to $60.19 a barrel on the ICE Futures Europe Exchange, and traded at a $5.29 premium to WTI for the same month.
OPEC+ faces a “daunting” challenge as output growth in countries from Brazil to Norway means 2020 could see a significant increase in stockpiles and pressure on prices, the IEA said on Thursday. Demand for OPEC’s crude in the first half of next year will be 1.4 million barrels a day below its August production, the IEA said.
There were some signs of goodwill ahead of planned trade talks between the U.S. and China. The Asian nation plans to encourage companies to buy American farm products including soybeans and pork and it will exclude those goods from additional tariffs, the editor-in-chief of a prominent state-run newspaper said.
