World Bank lowers oil price forecasts
Baku, Azerbaijan, Jan.9
By Leman Zeynalova – Trend:
Oil prices are expected to average $67 per barrel in 2019 and 2020, $2 per barrel lower than June projections; however, uncertainty around the forecast is high, Trend reports citing the Global Economic Prospects released by the World Bank (WB).
While growth in oil demand is expected to remain robust in 2019, the expected loss in momentum across emerging markets and developing economies (EMDEs) could have a greater impact on oil demand than expected, the WB believes.
The outlook for supply is uncertain and depends to a large extent on production decisions by OPEC and its non-OPEC partners, according to the report.
“While these producers have agreed to cut output by 1.2 million barrels per day for six months starting January 2019, few details have been forthcoming about the distribution of the cuts, and they may prove insufficient to reduce the oversupply of oil,” said the WB.
The report reads that considerable uncertainty remains about the full impact of Iranian sanctions once the waivers end, as well as the outlook for Venezuelan production.
“Meanwhile, crude oil output in the United States is expected to rise by a further 1 million barrels per day in 2019, with capacity constraints envisioned to ease in the second half of the year as new pipelines come onstream,” said the report.
As for 2018, the WB estimates that oil prices averaged $68 per barrel, a touch lower than June forecasts but about 30 percent higher than in 2017.
“While robust global oil consumption contributed to this increase, supply-side factors were the main drivers of price movements through the year. Continuing declines in production in Venezuela and market concern about the impact of US sanctions on Iran contributed to rising Brent crude oil prices, which peaked at $86 per barrel in early October,” said the report.
However, prices fell sharply in November after the United States announced temporary waivers to the sanctions on Iran for eight countries, including China and India, according to the WB. “The decline in prices also reflected continued rapid growth in oil production in the United States, as well as a substantial increase in supply by the Organization of the Petroleum Exporting Countries (OPEC) and the Russian Federation.”