Riyadh – Mubasher: Oil prices may reach $60 to $70 per barrel (pb) by mid-2019, data by the Arab Petroleum Investments Corporation (APICORP) showed.
The petroleum body forecast the rise in crude prices for 2019 after prices dropped towards the end of last year to around $54 pb. In October 2018, crude prices had witnessed strong gains, going as far as $85 pb.
“As market fundamentals re-assert themselves, the oil price will recover some of its current losses and our base case forecast is for the oil price to trade between the $60-$70/pb range towards the second half of the year, barring a sharp slowdown in the global economy,” APICORP’s senior economist Mustafa Ansari explained.
Until the market indicates that there are “stock drawdowns,” crude prices will remain under pressure, Ansari stressed, noting that as 2019 began, concerns emerged about the broader macro environment as well as the rise of protectionist policies, which in turn affected oil demand and prices.
Oil prices during 2019 will rely on the Organization of Petroleum Exporting Countries’ (OPEC) efforts in balancing the market, reinforcing signals of credibility, and carrying out production cuts, the senior economist added, citing APICORP’s research.
The analyst further noted that in May last year, US President Donald Trump’s withdrawal from the Joint Comprehensive Plan of Action (JCPOA) and his re-imposing of sanctions on Iran, weighed heavily on oil demand and prices. This withdrawal resulted in “tremendous uncertainty in the market, especially around the size of the potential loss of Iranian barrels,” he said, indicating the extended fall in production from Venezuela added to other output losses in Libya and Canada.
“The supply picture looked very bleak, especially given expectations of robust demand growth in the second half of 2018. As a response, Brent prices started rising in May and June trading above $75/pb towards the end of June/early July,” the analyst went on.
That is why OPEC members and non-members increased supply so as to “send a strong signal to the market” and ensure that prices don’t jump. This move eased market concerns, allowing prices to fall temporarily in July and August to around $70 pb by mid-August.
“However, this sentiment was quickly reversed as the market entered into a downward spiral, reinforced by massive liquidation of long positions by hedge funds and financial investors,” APICORP stated.
It further noted that OPEC was set to trim output in 2019 “in an attempt to balance the market,” whereas the US was forecast to bolster production.
