Global oil supply is ready to meet any potential growth in demand expected next year, assuming no major geopolitical shock, keeping oil prices stable despite recent volatility, according to the International Energy Agency (IEA).

In its first outlook for 2020, the Paris-based agency said there is plenty of Opec and non-Opec supply to meet any likely increase in demand next year, which should put at ease the volatility that returned to the oil market in recent months.

Until recently, the market had been focused on the supply side with the familiar list of uncertainties – Iran, Venezuela, Libya, and the Vienna Agreement between Opec and key non-Opec producers – lifting Brent prices above $70 per barrel in early April and keeping them there until late May, when prices fell to $60 per barrel.

However, despite these supply uncertainties still being in the spotlight, including the added pressure brought on by the attacks on two tankers in the Gulf of Oman earlier this week, the IEA said the main focus is now on oil demand.

This is due to the weakening economic sentiment as world trade growth is back to its slowest pace since the financial crisis ten years ago.

“Our estimate for global oil demand growth in 2019 has been cut for a second consecutive month. It is now projected at 1.2 million barrels of oil per day,” the IEA said.

“In the first quarter, global growth was only 300,000 bpd, and for the second quarter the estimate is 1.2 million bpd. We expect higher growth in the second half of the year at 1.6 million bpd,” the report said.

For now though, the IEA is optimistic about the latter part of this year and next year, it said, as it expects to see an improved economic picture.

“The OECD sees global GDP growth rebounding to 3.4% in 2020, assuming that trade disputes are resolved and confidence rebuilds,” it said.

“This suggests that global oil demand growth will have scope to recover from 1.2 million bpd in 2019 to 1.4 million bpd in 2020.”

In addition, the agency expects supply to meet any increase in demand, as the US is expected to contribute 90% of this year’s 1.9 million bpd increase in supply, and in 2020 non-Opec growth is expected to be significantly higher at 2.3 million bpd supported by contributions from Brazil, Canada, and Norway.

“A clear message from our first look at 2020 is that there is plenty of non-Opec supply growth available to meet any likely level of demand, assuming no major geopolitical shock, and the Opec countries are sitting on 3.2 million bpd of spare capacity,” the IEA said.

“This…will limit significant upward pressure on oil prices. However, this must be viewed against the needs of producers particularly with regard to investment in the new capacity that will be needed in the medium term,” it added.

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