Baku, Azerbaijan, July 1
By Leman Zeynalova – Trend:
Oil market is expected to see tightening in supply and demand balance in the second half of 2019, Trend reports citing Ann-Louise Hittle, vice president, Macro Oils, at Wood Mackenzie research and consulting company.
The expert believes that there is a downside risk for oil demand through the rest of the year if the ongoing trade war intensifies.
“Our forecast assumes no further trade war escalation. On that basis, we expect a tightening in the supply and demand balance in the second half of 2019, which supports prices,” she said, adding that Brent is forecast to average $68 per barrel for 2019 as a whole, and $69.50/b in the second half of 2019.
Geopolitical risk means the supply outlook is tightening, offsetting the moderate weakening in oil demand growth thus far this year, the expert said.
“We expect demand to increase 1 million barrels per day (b/d) in 2019, with a pick-up in the second half of the year after the weak growth in the first half. However, this is at risk if the US increases tariffs on its imports from China or other nations and global GDP weakens further.”
Further, the Wood Mackenzie expert noted that year-on-year, OPEC crude oil production for 2019 is expected to decline by 1.8 million b/d, with more than half of that reflecting the impact of US oil sanctions on Iran and Venezuela.
“In 2019, Iran’s production is expected to fall by 1 million b/d year-on-year, as US oil sanctions cut into its oil exports, especially after waivers for consuming nations to import limited Iranian oil were ended in early May 2019. Together, Venezuela and Iran’s crude oil production in 2019 is forecast to fall 1.6 million b/d,” said Hittle.
Non-OPEC production — and US oil supply – are strong, but these losses to OPEC supply carve into global supply growth this year, leaving it at just 0.7 million b/d, she added.
“The market also faces the uncertainty of the escalation of threats between the US and Iran. That would pose a supply risk in a 100 million b/d global market, with just 3.8 million b/d of spare productive capacity from OPEC. Only 1.8 million b/d of that spare capacity could be made available within a month,” she said. “At present, OPEC has capacity to boost output by about 3.8 million b/d within nine months. Almost all of the 1.8 million b/d that could be brought to market within a month is held by Saudi Arabia, Kuwait and the United Arab Emirates. If a significant outage occurs, the ability of the global industry to meet oil demand will be at risk.”
---
Follow the author on Twitter: @Lyaman_Zeyn