Despite a slight recovery in oil prices on the last day of 2018, benchmarks are set for their first overall annual decline since 2015, Reuters reports, noting since the start of trading in Asia today, Brent crude and West Texas Intermediate had gained around 1 percent each.
There seem to be too many uncertainties around oil for a stronger recovery, after prices began sliding in early October, after earlier this year rallying to above US$80 a barrel for Brent, albeit briefly. Concern about global economic growth and the next moves in the U.S.-China trade war are among the top factors at play. OPEC’s latest decision to begin cutting production from January is also a consideration, although the price trends from the past couple of months suggest the market was disappointed with the level of cuts.
President Trump has indicated a deal with China may be in the works, but uncertainty will likely persist until the moment such a deal is announced. A trade deal between the world’s biggest oil producer and one of the biggest consumers would certainly be bullish for oil, as would an improved global economy outlook – also related to a deal between the United States and China.
In fact, despite this year’s overall loss, crude oil benchmarks are seen by investment bank analysts to soon start rising. A Bloomberg survey among analysts suggests sentiment will change in the new year, with the consensus on Brent crude at US$70 a barrel.
According to the participants in the survey, demand for oil will remain strong in 2019, OPEC’s cut’s will work to prop up prices, and production losses in Venezuela and Iran will strengthen the bullish effect.
“We could even see something similar to a V-shaped recovery next year, on two very important conditions,” said Barclays’ Michael Cohen, adding the conditions were “One, that the reduction in Opec exports leads to a reduction in inventories. And two, that we don’t see a further deterioration in macroeconomic conditions.”
By Irina Slav for Oilprice.com
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