In its monthly report, the OPEC revised down its forecast for crude oil production in the US shale fields next year. Now, the cartel expects production in non-OPEC countries to increase by 2.17 million barrels a day, with its October estimate being 34,000 barrels a day higher. In its updated outlook, the organization cited the expected slower growth in the US production. Meanwhile, global oil demand forecast for 2019 and 2020 were left unchanged, at 980,000 barrels a day and 1.08 million barrels a day, respectively. Also, OPEC expects a smaller surplus in the global oil market next year.
Meanwhile, the drop in demand in a slowing global economy continues to make investors worried. In this context it is important that OPEC countries and their allies not only to maintain the existing supply cuts but to take additional steps to support the market and prevent a major decline in prices, which could hurt the budgets of the oil-producing countries.
On the demand side, the developments around the US-China trade relations remain in focus. After some progress last month, it looks like the negotiations are in stalemate again, with both countries tend to secure better conditions for themselves in this dispute. On Thursday, China officially lifted a ban on imports of the poultry meat from the US. This step may suggest there is some progress in talks now. Still, it’s not enough for investors to return to bets on resolving the conflict any time soon as the key issues stay in place.
Against this backdrop, the upside potential in Brent will likely remain limited at this stage, unless the US and China reach a significant progress towards at least a partial deal. Brent crude registered one-week highs above the $63 level on Thursday but has yet to confirm a break above this handle where the offers seem to remain. At the same time, the technical picture remains fairly neutral, with downside risks looking limited as long as oil futures are trading above the $60 key psychological support. In the weekly charts, Brent could finish in the green if the prices manage to stay above $62.