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Global slowing demand and a supply glut to drain oil’s gains in 2019

Gasoil News - Published on Wed, 05 Dec 2018

Image Source: Reuters
Reuters reported that oil analysts are increasingly pessimistic about the prospect of a price rally next year, when the outlook for demand is uncertain and supply is growing at breakneck speed, even though the market expects OPEC to cut output. A survey of 38 economists and analysts forecast Brent crude to average USD 74.50 a barrel in 2019, lower than the USD 76.88 outlook last month. The poll predicted Brent would average USD 73.20 in 2018, mostly in line with the USD 73 average for the global benchmark so far this year. Mr Adrià Morron Salmeron, economist at CaixaBank Research, said that “In the first half of next year we expect upward price pressure resulting from OPEC production cuts. Then, we expect downward price pressures from an uptick in U.S. shale production in the second half, as bottlenecks will disappear, and a deceleration of global growth.”

Of the 32 contributors who participated in both the October and November polls, 16 cut their 2019 average price forecast for Brent. The Organization of the Petroleum Exporting Countries as well as Russia and other producers meet in Vienna on Dec. 6/7 in an attempt to support crude prices, which have fallen by over 30 percent from early October’s four-year high of USD 86.74.

Analysts said that the group could announce cuts of anywhere between 1 and 1.4 million barrels per day.

Mr Frank Schallenberger, head of commodity research at LBBW, said that “The oil market is definitely oversupplied at the moment. Therefore, OPEC will decide to cut output in December. The recent drop in prices was so strong that I think the non-OPEC members will either agree to freeze production or join in the cut.”

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Posted By : Joykumar Irom on Wed, 05 Dec 2018
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