Oil prices are likely to trade between $60 and $70 per barrel range by mid-2019, despite sharp economic slowdown, the Arab Petroleum Investments Corporation (APICORP) said in a new report.
“A balanced market is consistent with a wide range of prices, and until the market starts showing signs of stock drawdowns, oil prices will continue to be under pressure,” said Mustafa Ansari, senior economist at APICORP.
“The dynamics of oil prices in 2019 will also depend in large part on OPEC+’s effectiveness in implementing the cuts, balancing the market and reinforcing the credibility of their signals.”
He added that “broader macro environment and the rise of protectionist policies will impact oil demand.”
The last quarter of 2018 was quite tough for oil markets worldwide. After a sharp rise in the oil price to $85 per barrel in October 2018, overall sentiment became bearish as 2018 ended on a lower note with oil prices down to around $54 a barrel.
According to APICORP, the stability in oil market fundamentals and expectations was disturbed in May 2018 when US President Donald Trump announced the US withdrawal from the Joint Comprehensive Plan of Action re-imposing sanctions on Iran.
Besides, falling Venezuela’s production and other output losses in Libya and Canada pushed prices to above $75 per barrel towards June-end and early July.
OPEC+ increased output in May and June 2018, which saw the core GCC countries (Saudi Arabia, UAE and Kuwait) and Russia increase production by 0.7 million barrels per day to prevent prices from rising sharply. While the initial response was positive, the sentiment quickly reversed as the market entered into a downward spiral.
“OPEC is expected to cut its output in 2019 in an attempt to balance the market, while US production is expected to maintain its upward momentum,” the report noted.