IMF downgrades oil price forecasts amid slowdown in global activity
Baku, Azerbaijan, Oct. 15
By Leman Zeynalova – Trend:
The International Monetary Fund (IMF) has downgraded oil price forecasts amid slowdown in global activity, Trend reports citing IMF’s October World Economic Outlook (WEO).
Based on oil futures contracts, average oil prices are projected at $61.8 in 2019, declining to $57.9 in 2020 (compared with $59.16 and $59.02, respectively, in the April 2019 WEO), reads the report.
The report shows that oil prices are expected to decline to about $55 a barrel by 2023 (lower than in the April 2019 WEO forecast), consistent with subdued medium-term demand prospects.
The IMF’s October downward revision of the global growth forecast—by 0.3 percent to 3.0 percent and by 0.2 percent to 3.4 percent for 2019 and 2020, respectively, from its April forecast—illustrates a slowdown in global activity, driven in particular by emerging markets and the euro area. In line with this slowdown, the International Energy Agency revised its oil demand growth forecast as of September for this year down to 1.1 million barrels per day (mbd) from 1.4 mbd in February
As of late September 2019, oil futures contracts indicate that Brent prices will gradually decline to $55 over the next five years. Baseline assumptions, also based on futures prices, suggest average annual prices of $61.8 a barrel in 2019—a decrease of 9.6 percent from the 2018 average—and $57.9 a barrel in 2020 for the IMF’s average petroleum spot prices.
Despite the weaker demand outlook, risks are tilted to the upside in the near term but balanced in the medium term. Upside risks to prices in the short term include ongoing geopolitical events in the Middle East disrupting oil supply and contributing to rising insurance and shipping costs of oil cargoes. Downside risks include higher US production and exports thanks to new Permian pipelines coming online, noncompliance among OPEC and non-OPEC members, and a downturn in petrochemical demand. Further, a rise in trade tensions and other risks to global growth could decelerate global activity and reduce oil demand in the medium term.
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