Azernews.Az

Thursday March 28 2024

Which main factors to support oil prices in 2019?

14 January 2019 12:06 (UTC+04:00)
Which main factors to support oil prices in 2019?

By Trend

The commitment by OPEC+ to remove 1.2 million barrels per day of supply from the market has failed to revive Brent, Trend reports citing Fitch Solutions Macro Research (a unit of Fitch Group).

"We hold to our current forecast for Brent for 2019, at an annual average of $75 per barrel," said the company.

The company analysts recall that on December 24, 2018 Brent traded at around $50.5 per barrel lows not seen since October 2017, having lost more than 18 percent of its value since the cut was announced.

Compared to its October high, the contract is down more than 30 percent and firmly in bear market territory, according to the report released by Fitch Solutions.

"However, as of January 9 prices have rebounded more than 20 percent from their December lows, off lower US inventories and shrinking production from Saudi Arabia. Combined with easing US-China

trade tensions and continued positive economic numbers from the US, this drove Brent to close above $61 per barrel," said the report.

Fitch Solutions believes further price appreciation will occur during 2019 , although the year will be marked with continued volatility.

"In addition, there will be several key milestone events on the calendar which have the potential to drastically shift supply, including the Iranian sanctions waivers expiry in May and the six month OPEC+ production cuts due to end in June. The production cuts could be either reduced or removed but this will be dependent on market conditions, with guidance expected at the April general meeting of OPEC."

The company expects the focus to be on the effectiveness in reducing excess supply in the market and the

outlook for US shale growth in the second half of 2019.

"The main factors we believe that will support higher prices are the winding down of sanction waivers

for Iran and continued strong demand growth from emerging markets outs ide of China."

OPEC and non-OPEC producers reached an agreement in December 2016 to curtail oil output jointly and ease a global glut after more than two years of low prices. OPEC agreed to slash the output by 1.2 million barrels per day from January 1.

Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017.

OPEC and its partners decided to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.

The 5th OPEC and non-OPEC Ministerial Meeting was held in Vienna, Austria, on December 7, 2018.

The meeting participants decided to adjust the overall production by 1.2 million barrels per day, effective as of January 2019 for an initial period of six months. The contributions from OPEC and the voluntary contributions from non-OPEC participating countries of the ‘Declaration of Cooperation’ will correspond to 0.8 million barrels per day (2.5 percent), and 0.4 million barrels per day (2 percent), respectively.

---

Follow us on Twitter @AzerNewsAz

Loading...
Latest See more