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Brent prices can see renewed plunge

Oil&Gas Materials 22 January 2019 16:52 (UTC +04:00)

Baku, Azerbaijan, Jan.22

By Leman Zeynalova – Trend:

Brent prices can see a renewed plunge by the end of 2019, Trend reports citing the UK-based Capital Economics consulting company.

Nevertheless, the company expects the oil prices will gain support from the possible OPEC+ cuts in the first half of 2019.

“As the oil price plunged from early October, OPEC and its allies announced a 1.2m bpd cut in production, effective from 1st January 2019. In fact, preliminary data show that OPEC members, led by Saudi Arabia, started to lower production in December. If the cuts are enacted in full, we think that this could put a floor under prices in the first half of 2019,” reads a report from Capital Economics.

However, the company forecasts that US economic growth will slow sharply in the second half of the year which, in tandem with the downturn in China, is likely to depress growth in oil demand.

“As such, we expect the market to be in surplus in late 2019 and that this will lead to a renewed plunge in the oil (Brent) price to $50 per barrel by end-year,” said Capital Economics.

One downside risk to the company’s forecast would be any further escalation in global trade tensions.

“Admittedly, the US and China are currently negotiating some sort of face-saving deal. But tensions could flare up again as the US presidential election approaches, with potentially adverse implications for diesel demand. Looking further ahead, our macroeconomic forecasts point to some recovery in commodity prices in 2020 as US equities revive, the dollar weakens and the Chinese economy stabilizes,” reads the report.

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.

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