Oil Price Seen Holding Steady on Middle East Tension, Global Downturn

Business

October 2nd, 5:55am

London - Asharq Al-Awsat

The OPEC logo is seen outside their headquarters in Vienna, Austria. Photo: Reuters

Oil prices are likely to remain steady this year as supply shocks from Saudi Arabia fail to lift prices in a market grappling with flagging demand, a Reuters survey showed on Monday, as warnings of a global economic deceleration mount. The survey of 53 economists and analysts forecast Brent crude would average $65.19 a barrel in 2019, little changed from $65.02 forecast last month. This was however, slightly higher than the $64.76 average for the global benchmark so far this year. West Texas Intermediate crude futures were seen averaging $57.96 per barrel against last month's $57.90 forecast. WTI prices have averaged $57.11 so far this year. Carsten Fritsch, senior commodity analyst at Commerzbank, said: "The oil market is facing challenging times. Recent attacks on oil facilities in Saudi Arabia have painfully demonstrated the risks to oil supply, which is why short-term price spikes are possible at any time." "The oil market fundamentals, on the other hand, are deteriorating. Demand growth is weakening, oil supply outside OPEC is rising significantly and the production of OPEC and its allies has recently faded. We therefore do not consider the recent price surge to be sustainable." Brent prices posted their biggest one-day price jump in 30 years after an attack on Saudi Aramco facilities earlier this month, which halved crude oil supply from the world's top oil exporter. The attack led to fogginess in the market and heightened the tensions in an already troubled region by the ongoing conflicts between Saudi Arabia's ally, the United States and Iran. However, the Kingdom has recovered its oil production faster than it was expected. For his part, Cailin Birch, an analyst at the Economist Intelligence Unit, said: "Ultimately, the impact of the drone strikes on oil prices will depend on two main factors: how long it takes for Saudi to bring these facilities back on stream, and whether or not further direct strikes are carried out." Despite the attacks, most analysts said the Organization of the Petroleum Exporting Countries could extend the output cuts until the end of next year, and sanctions on Iran and Venezuela were unlikely to ease soon. While there is enough spare capacity to compensate for the lost production, analysts said the festering US-China trade dispute, along with robust output from non-OPEC countries, will keep oil prices in check over the long term. Analysts expect growth in global oil demand to range between 0.9-1.3 million bpd in 2019 and 0.8-1.5 million bpd next year. The US Energy Information Administration cut its 2019 world oil demand growth forecast for an eighth straight month in September to 0.89 million barrels per day. On the supply side, non-OPEC production would continue to rise, poll respondents said, with United States dominating the global supply growth with modest increases from Brazil, Norway and Mexico. Edward Moya, a senior market analyst at OANDA, said: "If Trump remains the frontrunner, expectations for US production to rise to fresh record highs will continue with 2020 possibly topping 13.5 million bpd. Trump's pro-energy policies will remain very supportive for US becoming the world's top oil exporter." Under an agreement between OPEC members and non-OPEC producers, Russia agreed to cut production by 228,000 barrels per day from its level in October 2018. On Monday, Reuters cited two sources saying Russia's output declined to 11.24 million bpd in Sept. 1-29, down from 11.29 million bpd in the previous month. Under an agreement between OPEC members and non-OPEC producers, Russia agreed to cut production by 228,000 barrels per day from its level in October 2018. According to Reuters, Russia should cut its output by 11.7 and 11.8 barrels per day. The Russian Energy Ministry declined to comment. After the attack on the Saudi oil facilities, the Russian oil production was relatively high.

from Asharq AL-awsat https://aawsat.com/english/home/article/1927931/oil-price-seen-holding-steady-middle-east-tension-global-downturn