BAKU, Azerbaijan, Jan.27
By Leman Zeynalova – Trend:
Oil prices initially rose to around $70 per barrel (pb) in early January as trade tensions eased, US-Iran geopolitical tensions escalated and OPEC+ announced deeper output cuts, Trend reports citing UK-based Capital Economics research and consulting company.
However, prices have recently fallen back to just over $60pb, owing to a sell-off in risky assets amid fears that the Wuhan coronavirus will depress oil demand. But assuming that the virus is eventually brought under control, we expect that the price of Brent will rise to $75pb by end-2020 as the market moves into a deficit,” said the company.
Capital Economics believes that oil supply growth will be weak as the company expects the current OPEC+ output cuts to be extended until the end of this year.
“Meanwhile, on the demand side, we forecast that global economic growth will gradually recover, which should support oil demand. Additionally, the recent implementation of new maritime sulphur-fuel regulations (IMO 2020) should provide a structural boost to demand of about 0.9m bpd. In total, we estimate that oil consumption will rise by around 1m bpd in 2020, up from our estimate of 0.8m bpd in 2019,” said the company.
Capital Economics points out that the biggest upside risk to its price forecast is an escalation of geopolitical tensions in the Middle East to an all-out military conflict.
“If Iran managed to close the Strait of Hormuz, then we estimate that prices would initially surge to $150pb. However, we doubt that they would remain there for long, as supply networks adjust and demand falters in the wake of high prices,” said the company.
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