Although the oil market will remain oversupplied in the first quarter of 2019, the OPEC+ producer cuts will start to work in the second quarter and gradually rebalance the market to the point of Brent Crude hitting $80 a barrel in Q4 2019, according to energy information provider Argus Media.
The market needs time to work through the current oversupply, Azlin Ahmad, editor for crude oil at Argus Media, told CNBC on Monday.
The OPEC+ combined production cut of 1.2 million bpd takes effect in January 2019 for an initial six-month period, with a possible review in April.
According to Argus Media, Brent Crude prices will trade at around $65 a barrel in Q1, some $68 in Q2, in the low $70s in Q3, and breaking above $80 per barrel in the fourth quarter next year, according to Ahmad.
On Monday afternoon at 01:30 p.m. EST, Brent Crude was down 4.42 percent at $51.71, and WTI Crude was trading down 4.41 percent at $43.58, as concerns about slowing economic and oil demand growth persist.
While some banks have drastically cut their oil price forecasts for next year, Swiss bank UBS expects Brent Crude to rebound to $70 and even $80 a barrel over the next 12 months. The head of asset allocation for APAC at UBS, Adrian Zuercher, told CNBC last week that while supply of crude oil was still abundant, this could soon change as the OPEC+ production cuts enter into effect.
While the recent oil price drop suggests many don’t believe these cuts will be as effective as the first ones in 2017, Zuercher noted a report by the Wall Street Journal that Saudi Arabia plans to cut more than initially expected, and the fact that Venezuela’s production would likely continue downwards as would Iran’s under the weight of U.S. sanctions.
By Tsvetana Paraskova for Oilprice.com
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