Brent Will Recover Towards Year-End
The price of Brent crude oil will recover towards the end of the year to average over US$74 per barrel in 2018.
This is the core view of Fitch Solutions Macro Research, according to a recent report from the company.
“The sharp decline in oil prices in recent weeks, which saw Brent crude fall from US$85 per barrel at the beginning of November… is the result of a slight slowing of global demand,” the report stated.
“It is largely driven by stronger than expected supply from the United States, Libya and Iraq and unexpected waivers on Iranian sanctions that were provided to eight countries reliant on Iranian oil, such as India, Turkey and China,” the report added.
“From a technical perspective, trendline support comes in at US$60-62 per barrel, which suggests that oil prices should find support in the near term. Moreover, our core view is for oil prices to recover towards the end of the year and to average US$74.50 per barrel in 2018, with strength being sustained in the coming quarters as oil prices average $81 per barrel in 2019,” the report continued.
Fitch Solutions Macro Research’s report stated that the recent decline in oil prices is both positive and negative for the global economy.
“On the positive side, lower oil prices improve the terms of trade and fiscal accounts, and help to mitigate inflationary pressures of importing countries, many of which have started to come under pressure in recent months,” the report said.
“On the negative side, it weighs on the earnings of oil exporters and fiscal revenues and is correlated with the manufacturing sector, which could be negative for growth,” the report added.
Commenting on the value of Brent, Michael Burns, an oil and gas partner at law firm Ashurst, said impacts such as the coming back into force of US sanctions on Iran have not been sufficient to balance prices.
“We now find ourselves in a position where OPEC may make cuts in December. A situation which … not many people will have foreseen,” Mr Burns said.
Source: Rigzone