A balanced oil market in 2020 is contingent on three pillars, according to Rystad Energy.

A balanced oil market in 2020 is contingent on three “pillars”, according to Rystad Energy.

As the independent energy research and business intelligence company highlights, these pillars comprise the following:

No global recession Continued OPEC production cuts The effect of IMO 2020 regulations

“Markets can balance with an extension of OPEC cuts through 2020, as we believe the IMO 2020 regulations will create more demand for crude oil,” Bjornar Tonhaugen, head of oil market research at Rystad Energy, said in a company statement.

“Moreover, the global economy needs to avoid a sharp slowdown and oil demand recover to more normal growth rates of between 1 million and 1.2 million barrels per day,” he added.

“If the stars fail to align, however, OPEC may need to discuss much deeper cuts to support the market,” Tonhaugen continued.

The International Energy Agency’s (IEA) latest oil market report, which was released in the beginning of August, revealed that short-term market balance had been “tightened slightly” by the reduction in supply from OPEC countries. The report outlined, however, that under the IEA’s assumptions at the time, the oil market will be “well supplied” in 2020.

According to the IEA’s July oil market report, oil supply exceeded demand by 0.9 million barrels per day (MMbpd) in the first half of 2019. IEA data released in July showed a global surplus of 0.5MMbpd in the second quarter (2Q). Previous expectations for 2Q were of a 0.5MMbpd deficit.

From January 1, 2020, the limit for sulphur in fuel oil used on board ships operating outside designated emission control areas will be reduced to 0.50 percent m/m (mass by mass), from 3.50 percent m/m, the International Maritime Organization highlights.

Founded in 1974, the IEA was initially designed to help countries co-ordinate a collective response to major disruptions in the supply of oil. Rystad Energy provides data, tools, analytics and consultancy services to clients exposed to the energy industry across the globe.

To contact the author, email andreas.exarheas@rigzone.com