Oil prices will remain supported near current levels this year as persistent geo-political risks and OPEC-led output curbs help offset growing supply from other producers, a Reuters poll showed.
The survey of 50 economists and analysts, mainly conducted before the coronavirus outbreak, forecast benchmark Brent crude to average $63.48 per barrel in 2020. That compares with an average of $63.76 so far this year and last month’s forecast of $63.07.
The 2020 outlook for West Texas Intermediate rose to $58.22 a barrel from December’s $57.70 forecast.
Oil prices surged earlier this month after a U.S. drone strike killed a top Iranian commander, but the rally was short-lived.
“Heightened tensions in the Middle East will keep upward pressure on prices, as the risk that U.S. and Iran could accidentally enter into a direct military conflict persists.” Economist Intelligence Unit analyst Cailin Birch said.
Prices are now near their lowest since October however, on fears that the coronavirus epidemic might hit global growth and oil demand, but further downside should be capped by lower output from the Organization of Petroleum Exporting Countries (OPEC).
“OPEC will come close to balancing the market in 2020 and their deeper than expected cuts will provide a layer of support as oil markets remain fixated on the recent output increase with non-OPEC producers,” OANDA analyst Edward Moya said.
Most poll respondents expect OPEC and its allies led by Russia, a grouping known as OPEC+, to extend their agreement to limit supply beyond the currently agreed end date at the end of March.
“The group will be forced to maintain the current cuts at least up to end-year as non-OPEC growth will probably grow quicker than global demand in 2020,” Intesa Sanpaolo analyst Daniela Corsini said.
U.S. oil production is expected to rise to a record of 13.30 million barrels per day (mbpd) in 2020, the U.S. Energy Information Administration said.
Growing non-OPEC supply could also offset the price effect of a de-escalation in the U.S.-China trade dispute following the signing of a phase one deal, analysts said.
Under the deal, China pledged to buy over $50 billion more of U.S. energy products over two years.
A revival of the spat between the two countries remains a risk, with another escalation likely to slow demand growth, UBS analyst Giovanni Staunovo said.
“Considering Chinese crude imports of U.S. barrels were zero in recent months, a small pick-up will push up the export volume, but otherwise no big impact is expected on prices.”
Analysts expect global oil demand to grow by about 0.8-1.5 mbpd this year, which compares with the International Energy Agency’s 1.2 mbpd outlook.
Source: Reuters (Reporting by K. Sathya Narayanan in Bengaluru; editing by Arpan Varghese, Noah Browning and Kirsten Donovan) https://www.hellenicshippingnews.com/opec-curbs-supply-risks-to-buoy-oil-prices-in-2020/