The International Energy Agency (IEA) expects the global oil markets to become oversupplied again in 2020, despite the recent decision by the Saudi-led cartel to extend output reductions through next March.

The global energy watchdog in its monthly report on Friday noted oil supply in the first half of 2019 exceeded demand by 0.9 million b/d. The latest data indicate a global surplus in 2Q2019 of 0.5 million b/d -- instead of expectations for a 0.5 million b/d deficit. The surplus is tied to an estimated 2.1 million b/d expansion in oil supply largely tied to soaring U.S. output, a slight increase from 2 million b/d in 2019.

“Clearly, market tightness is not an issue for the time being and any rebalancing seems to have moved further into the future,” IEA researchers said.

Brent crude was trading near $67/bbl on Friday morning, up slightly, while West Texas Intermediate was around $60.52, about 0.5% higher than on Thursday.

The Organization of the Petroleum Exporting Countries and its Russian-led allies, often referred to as OPEC+, earlier this month agreed to keep production lower through next March.

However, this “does not change the fundamental outlook of an oversupplied market,” IEA said. OPEC+ last December had instituted voluntary production adjustments of 1.2 million b/d, despite pressure from President Trump to maintain higher levels (and thus lower oil prices) to benefit U.S. consumers.

“On our balances, assuming constant OPEC output at the current level of around 30 million b/d, by the end of 1Q2020 stocks could increase by a net 136 million bbl,” IEA experts said. “The call on OPEC crude in early 2020 could fall to only 28 million b/d.”

The oversupply clearly presents a “major challenge to those who have taken on the task of market management,” according to IEA. “The picture will evolve as 2019 progresses, but in the near term the main area of focus remains demand growth.”

Gross domestic product estimates remain unchanged from the watchdog’s June report, but “there are indications of deteriorating trade and manufacturing activity,” with global manufacturing output in 2Q2019 down for the first time since late 2012, while new orders also have declined at a rapid pace.

Demand growth this year remains flat from IEA’s June estimate of 1.2 million b/d. If the economic outlook for 2020 were to improve, demand growth could increase to 1.4 million b/d.

“Unless the economic backdrop and the trade disputes worsen, global growth is nevertheless expected to be higher in the second half of 2019. There will be support from oil prices, which, if they stay roughly where they are today, will be about 8% below the levels seen last year.”

Separately, OPEC said Thursday in its monthly report that crude demand will decline in 2020 as its rivals in North America and elsewhere continue to boost output.

“The demand for OPEC crude is expected to average 29.3 million b/d in 2020, down by around 1.3 million b/d from 2019,” the cartel said.

The July report by OPEC, the first in which the cartel forecast 2020 production levels, it predicted non-OPEC supply would increase by 2.4 million b/d, higher than in 2019.

“This is mainly due to the debottlenecking of oil infrastructure in North America and new project ramp ups in Brazil, Norway and Australia,” OPEC said. “In contrast, natural decline in Mexico, Indonesia, Colombia and Egypt is foreseen to offset some of this growth.”

U.S. tight crude output is climbing as Permian Basin crude finds more pipeline outlets to the Gulf Coast for export, OPEC said.

“More than 2.5 million b/d of new pipeline capacity in the Permian is expected to become operational by July 2020,” OPEC estimated. “Investment by exploration and production companies in the U.S. is expected to reach around $180 billion next year, with the tight oil sector forecast to spend some $124 billion.”

Non-OPEC supply growth also would be supported by the start ups in several fields next year, including Norway's Johan Sverdrup as well as Brazil fields.