JP Morgan has revising its outlook on Brent crude to US$73 per barrel on average, CNBC reports. The bank's earlier forecast was for an average Brent crude price of US$83.50 a barrel.
The head of the bank's Asia-Pacific oil and gas operations, Scott Darling, told CONB analysts had factored in the increase in supply in North America that will occur in the second half of 2019 and will eventually pressure prices even lower in 2020, to an average US$64 in that year.
With everything that has been happening to oil in the last few days, with prices getting pummeled by mass short covering and pessimistic economic forecasts for global growth, chances are investment bank will soon begin revising their forecasts unless they are certain OPEC will agree a production cut at its Vienna meeting next month.
This cut is by no means certain although bulls are pinning their hopes on it in the absence of any other significant positive factor working for oil right now. On the contrary, even the latest production numbers from OPEC's number-one, Saudi Arabia, were bearish for prices: Bloomberg's Javier Blas yesterday reported, citing industry insiders, that the Kingdom's oil production since the beginning of this month jumped to new highs, reaching 10.8-10.9 million bpd. Supply, including production and inventory drawdowns reached 11 million bpd on some days.
JP Morgan's Darling said if OPEC is to balance the market and prop up prices, it would need to reduce its combined production by as much as 1.2 million bpd. The cartel itself is discussing cuts of between 1 million bpd and 1.4 million bpd. Russia has yet to weigh in but a Reuters report citing two senior Russian government officials said the country would rather not join an OPEC-led cut this time, even as President Putin said at an industry event that Russia will cooperate with OPEC on oil prices.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More