The increase in oil production, especially in the US, will continue to restrain price hike next year, expert Vassiliy Chekulaev, director general of Coface Russia, told Trend.
Nevertheless, analysts at Coface believe that despite the constraining factors, oil prices will rise in the next 12 months, he said. The demand for oil in 2019 is unlikely to rise, he noted.
"Thus, despite that in 2019, global economic growth is likely to slow down due to risks in the global market [trade wars, Brexit, crisis in Italy, deterioration of positions of developing countries in international market, etc.], based on current data, it is safe to assert that the global economy will continue to grow steadily and relatively quickly, maintaining a strong demand for hydrocarbons."
"In addition, at a meeting of OPEC members Dec. 6, a decision was made to reduce oil production. The fact that the parties managed to reach an agreement means that in 2019, the supply in the market will decrease, and this will contribute to the growth of prices," Chekulaev added.
He noted that next year, as the analysts at Coface say, the price will be relatively stable at $75.
The expert added that the excess of supply, which exerts downward pressure on prices, appeared in November this year as a result of the simultaneous effect of three factors.
The first factor is the approval of an increase in oil production by OPEC countries on June 23, he said.
"This decision was made to help some OPEC countries that are in difficult economic situation, for example, Venezuela, experiencing a sharp crisis, and Iran, suffering greatly from the US sanctions," he noted. "As a result, Russia and Saudi Arabia significantly increased production, the latter to a record 11.2 million barrels per day."
The second factor is the US sanctions against Iran imposed Nov. 4, which will reduce the supply in the hydrocarbon market and cause a price increase, he said.
"However, the US government made exceptions in the sanctions for some buyers of Iranian oil, which allowed such major importers as China and India to continue unhindered trade with their Middle Eastern partner," he noted. "Thus, Iran managed to maintain significantly higher oil exports than analysts were expecting."
The third factor is the consistent increase in oil reserves of the US, which also contributed to decrease in oil prices, he said.
Chekulaev noted that in the first half of November, the US produced an average of 11.7 million barrels a day. If the trend continues, by the end of the year, the US may become the leading oil supplier in the global market, he added.
"The collapse in oil prices is facilitated by a number of reasons, but the main one is the oversupply from three biggest exporters - Saudi Arabia, Russia and the US - and the concern of oil traders about the alarming trends in the global economy and their potential impact on the demand," he said.
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