Gelnlock Energy's November forecast sees a continuing reduction in oil inventories through the remainder of the year, but with higher inventories in 2020 and a larger build in 2021, due mainly to revisions in earlier estimates of supply and an earlier and stronger than expected recovery in the US onshore. While the EIA published its International Energy Outlook for 2020 last month, this revision does not include an update of their long term demand forecast.

A few key points:

1. Oil inventories will fall to 2019 levels around 2023.

2. Under current assumptions, the oil market returns to oversupply in 2021 and then a small supply deficit in 2022, which accelerates into 2023.

3. Estimates of global crude stocks in 2021 support and extension of OPEC+ production curbs.

4. A comparison of breakeven prices suggests that low operating costs will be more important than low lifecycle breakeven costs once oil demand begins to decline.

5. US shale will be the best positioned asset type once oil demand begins to decline.

6. In the expectation case, a structural supply deficit emerges in 2023 and continues beyond as demand recovers while supply stagnates. The structural supply deficit is exacerbated by higher demand in the OPEC case.

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