Crude market continues to be dominated by uncertainty as attention turns to next OPEC meet

The oil market continues to be impacted by economic factors, supply worries and general uncertainty.

Crude inventories in the US continue to rise with investors checking out rising supply on a week when OPEC released its World Oil Outlook.

In Friday trading, Brent crude was holding above US$61 with WTI above US$56 a barrel.

The annual OPEC World Oil Outlook was released this week with the OPEC Secretary General, Mohammad Barkindo presenting the report in Vienna, outlining the long term growth in energy demand by 25% to 357 million barrels of oil equivalent a day by 2040.

Demand solid

Acknowledging the huge growth in renewables and gas, he described the picture for oil demand as solid, while “demand remains at relatively healthy levels” with an addition of more than 10 million barrels a day.

OPEC is expected to remain the key supplier of oil to the world, with most of the other supply coming from the US with “robust medium-term non-OPEC supply growth dominated by US tight shale” but with the peak expected mid-2020.

Investment in the upstream oil industry is estimated to be around US$370 billion per year to keep pace with demand, according to the OPEC outlook.

Much of this investment will be needed in the US given its high share of growth and the “relatively high cost” of production.

The outlook report reiterated that “OPEC member countries remain fully committed to investments across the whole industry value chain”.

Looking ahead to near term demand for next year, Barkindo said that having looked at the numbers and the technical levels, he believes that “2020 looks like it has upside potential that will defy some of the gloomy predictions we have seen during the course of the year.”

Vienna meeting

Some analysts took this a possible sign that there might be no increase in production cuts when ministers meet in Vienna in four weeks.

The long awaited Saudi Aramco IPO was announced at the beginning of the week with full plans in place for a future listing with the prospectus expected to be released this week.

Analysts are expecting it to be one of the biggest stock market listings in history with a possible valuation of $1.2 to $1.5 trillion when listed on the Saudi Arabia exchange Tadawul.

Saudi Aramco will list 1 to 3% of the company with high local interest and an appeal to foreign investors. This IPO is being seen as the beginning of opening up the Saudi Arabia economy for future investment with the money going to the Public Investment Fund; the sovereign wealth fund designed to lead the countrys economic diversification future plans.

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