Baku, Azerbaijan, Oct.22
By Leman Zeynalova – Trend:
The price of oil has bucked the otherwise negative trend in commodity markets this year and has surged on supply concerns, UK-based Capital Economics consulting company said in its report obtained by Trend.
“The main risk is a collapse in Iran’s exports as a result of the re-imposition of US sanctions. President Trump has threatened to reduce the country’s exports to zero. But we think that these fears are overdone. Our forecasts assume a 1m bpd fall in Iran’s supply, which tallies with the drop in output in 2012-16, when (more comprehensive) sanctions were imposed,” said the report.
At the same time, Capital Economics expects increases in production from other OPEC and non-OPEC producers to offset the loss of the Iranian barrels. ”Russia appears to have abandoned earlier efforts at restraint and Saudi Arabia has been steadily increasing output.”
“Admittedly, growth in US production has slowed lately, despite higher prices. Pipeline capacity limitations are acting as a lid on production, but new pipelines under construction should remove this bottleneck by mid-2019. At the same time, slower economic growth in China and the US and the risk of a downturn in world trade point to weaker growth in oil demand,” said the company.
As such, the UK company forecasts that the global market will return to surplus and that the price of Brent crude will fall to $60 per barrel by end-2019.
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