Oil market to be in surplus, prices to fall in 2019
By Trend
Softer growth in demand suggests that the oil market will be in surplus by end-2019 and that prices will fall, the UK-based Capital Economics consulting company said.
"We think that the 1.2 million barrels per day (bpd) output cut by OPEC+ will bring the market close to balance in the first half of next year. But weaker growth in US demand will prompt a return to surplus later in the year," Trend reports citing the company’s outlook.
At the same time, the company believes that all the signs are that US production will continue to expand rapidly.
"We expect the price of Brent crude to fall to $55 per barrel by end-2019. However, additional pipeline capacity is coming onstream in the US which should facilitate exports and start to close the spread between Brent and WTI, which we expect to narrow to just $5 per barrel, from $10 currently,"
Similarly, the company expects the price of coal to remain under downward pressure on the back of the more subdued economic activity and ongoing efforts to substitute for cleaner fuels in power generation.
"But we are more upbeat on the outlook for natural gas prices, premised on strong growth in demand. Even though US natural gas production has surged this year and is expected to grow again in 2019, it is failing to keep up with consumption growth and we expect the price of Henry Hub to average $3.7 per mBtu (million British thermal units) in 2019, up from $3 in 2018," said Capital Economics.