In its December 2019 oil market report, the International Energy Agency (IEA) wrote that even with deeper production cuts from the Organisation of Petroleum Exporting Countires (OPEC), it expects a 700,000 barrels per day (bpd) surplus in Q1 2020.
OPEC and its allies, collectively known as OPEC+, agreed on 6 December to deepen production cuts from 1.2mbpd to 1.7mbpd. Saudi Arabia also agreed to a further 400,000bpd cut, bringing total production cuts to 2.1mbpd. Compliance with the agreement has been a key issue, as some nations have frequently produced more than their quota.
"If all the countries comply with their new allocations and Saudi Arabia delivers the rest of its voluntary cut of 0.4 mb/d, the fall in production volume versus today will be about 0.5 mb/d," IEA wrote. "In this Report we have reduced our forecast for non-OPEC production growth next year from 2.3 mb/d to 2.1 mb/d to take account of lower output from participants in the OPEC+ deal and a weaker growth outlook for Brazil, Ghana and the United States. Even so, with our demand outlook unchanged, there could still be a surplus of 0.7 mb/d in the market in 1Q20."
It continued to note that the US would likely become a sustained net oil exporter by late 2020 or early 2021. "However, this does not mean that energy independence has been achieved: the United States remains a major crude oil importer," the IEA wrote. "In September, it received 6.5 mb/d of crude oil, with the largest volume coming from Canada and, with exports of 3.1 mb/d, it remained a significant net importer of 3.4 mb/d. Quality issues and greater market competition indicate that the United States will remain a major crude importer."