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Fitch Solutions lowers oil price forecasts for 2022 and beyond

Oil&Gas Materials 5 July 2019 12:15 (UTC +04:00)

Baku, Azerbaijan, July 5

By Leman Zeynalova – Trend:

Fitch Solutions Macro Research (a unit of Fitch Group) has lowered its oil price forecasts for 2022 and beyond, Trend reports citing the company.

“We are holding our 2019 and 2020 Brent forecast to $70.0/bbl and $76.0/bbl. However, we have lowered our forecast for 2022 and beyond to $82.0/bbl in light of the higher likelihood of a protracted trade tariff impact to economic growth and resilient US production. We have also adjusted WTI prices in line with a narrowing spread in 2019 and the new mid-term outlook on growth,” said the company in its report.

Fitch Solutions said that mixed signals is the theme this month as oil prices together with the global economy present conflicting indicators.

“Oil markets have seen several supply side events which had strong upside bias but failed to sustain a rally in prices with gains quickly falling as demand concerns and US shale rang louder. Despite multiple attacks on oil assets in the Middle East, continued declines in production and exports from US sanction hit Venezuela and Iran, and OPEC+ managing market supply, the oil price for June 20 19 remained larg ely unchang ed. The market's muted response to tanker attacks and the downing of a US drone leads us to believe that supply concerns are balanced by strong US output and demand side risk continues to feed into bearish sentiment,” said the company.

Fitch Solutions believes that demand side weakness and concern over the macroeconomic environment is dominating sentiment and capping upward price action.

“We have moderated our mid-term outlook for prices post-2022 as fundamentals are less supportive of substantial gains based today’s market dynamics and prices. However, our view remains bullish supported by a coordinated monetary policy and stimulus efforts buoyed by expected US rate cuts this year and an increase in demand from IMO 2020 impacts,” said the company.

The report says that OPEC+ production cuts have success fully removed production from the market, but US shale has replaced and exceeded those missing barrels leaving prices to near where they were when cuts first began in 2017.

“Agreement among members was a foregone conclusion as OPEC+ heavyweights Russia and Saudi Arabia agreed prior to July's official meeting to keep cuts in place for nine months to March 2020. Recent production cut announcements have had mixed impacts with the last round in early 2019 supporting gains temporarily, however, prices have since trended downward towards levels seen near the first round of cuts in 2017,” said Fitch Solutions.

The 176th Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) was held in Vienna, Austria, on 1 July 2019. In view of the current fundamentals and the consensus view on the outlook for the remainder of 2019, the Conference decided to extend the voluntary production adjustments agreed at the 175th Meeting of the OPEC Conference for an additional period of nine months from 01 July 2019 to 31 March 2020.

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Follow the author on Twitter: @Lyaman_Zeyn

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