Brent price forecast to US$66 per bbl for 2019: Jadwa Investment

Ann Santiago
February 8, 2019

Further gains in the price of United States crude oil are possible as the recovery that began in late December a year ago shows no sign of reversing just yet.

Helping to underpin prices are the OPEC-led supply cuts and Washington's sanctions against Venezuelan crude exports. The existing tariff schedule is likely to remain in place, however, news reports said.

As of 7:35 a.m. EST, West Texas Intermediate front-month crude future prices fell 0.9 percent to $53.53 per barrel, while Brent future prices fell 0.5 percent to $62.36 per barrel as of the same time.

"The key supply story remains the ongoing OPEC production cuts", United States bank Goldman Sachs said on Wednesday.

USA crude inventories rose by 2.5 million barrels last week, the American Petroleum Institute said on Tuesday.

Russia's Energy Minister Novak said the 10 countries collaborating with OPEC now on oil price support could discuss a charter outlining open-ended cooperation when the two groups meet in April, state-owned TASS news agency reported.

Washington said last week that after April 28 foreign companies would not be able to conduct business with Venezuelan state-run oil firm PDVSA using the US financial system, effectively banning them from paying in USA dollars. The cartel and the world's biggest exporter, Saudi Arabia, slashed its output more than expected under the OPEC deal, to 10.2 million barrels a day in January and is aiming to pump around 100,000 barrels less in February.

Also dampening market sentiment still were worries about weaker global economic growth and the US-China trade dispute.

A decline in OPEC production and a squeeze on supply from Iran and Venezuela from US sanctions have led many analysts to forecast that the market will be balanced in 2019.

Market participants have focused on signs of tightening global crude supply after the Organization of the Petroleum Exporting Countries (OPEC) and allies began an agreement in January to cut output. Oil prices fell on Tuesday after a survey showed euro zone business expansion almost stalled in January.

Meanwhile, OPEC data shows that while Q4 2018 oil output was flat quarter-on-quarter, there was a sizable decline in output in December, by 750 thousand bpd month-on-month.

Adding to the bearish sentiment, CNBC reported that a meeting between President Donald Trump and his Chinese counterpart Xi Jinping was "highly unlikely" before the March 1 deadline set by the US for reaching a trade deal.

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