Oil markets have always been cyclical, and now even more with advanced electronic trading, more speculation (often resulting in faster changes in oil prices) and more manufacturers, including the revival of oil production in the United States, now reaching above 11 million barrels a day. Added to the cocktail of uncertainty are also a number of geopolitical and economic factors, including ongoing trade tensions between the United States and China, the anxiety of US Federal Reserve policy and the wars in Syria, Yemen and elsewhere, making it harder forecasting the direction of future oil prices.
This dynamics proved to be true over the past two and a half months as market experts saw (often surprisingly) how global oil prices reached perennial highs in October, just to rapidly decline by 40 percent to date. Global crude oil prices, Brent's gross futures in London, traded in the mid-1980s, while the US-based reference oil brand WestWinter Intermediate (WTI), traded on New Mexico, hovers in mid-1970s, a convenient price for US shale oil producers and about 25 dollars a barrel above the average oil production, a pause for shale production.
However, in conditions of all bad economic news and troubled geopolitical developments, a group of bankers once again sound optimistic about future oil price predictions. On Friday, Bloomberg said many of the world's largest banks forecast a return to oil prices next year, as fears of recession proved unjustified.
According to Bloomberg's analysis of oil analysts, Brent will reach a price of $ 70 per barrel in 2019, almost one third higher than its price on Thursday. Michael Cohen, head of the energy and goods research at Barclays PLC in New York, said that "we can see something similar to V-shaping in the next year, in two very important conditions." One, that the reduction in OPEC's exports leads to a reduction of the supplies. Both of us, we do not see any further deterioration of the macroeconomic conditions. "
Bloomberg's report added that despite the recent darker outlook for the global economy, amid prolonged trade disputes between the US and China, and while the US Federal Reserve is embarking on a tightening of monetary policy, most commentators do not see a real recession worrying the oil market next year. The median forecast of 24 oil analysts in the Bloomberg poll predicts Brent's futile futures in 2019 will sip exactly $ 70 per barrel. The price on Thursday was around $ 53.50, while the average so far in 2018 is around $ 72. Meanwhile, the average WTI forecast is $ 61.13. WTI Futures traded at around $ 45.27 on Monday. Related: Low oil prices may cripple Texas workload
Michael Tran, commodity stocks strategist at RBC Capital Markets LLC, said prices are close to the bottom, while "global supply and demand should strike a great balance next year." Bloomberg added that in the absence of a severe economic crisis, most analysts predict that world oil consumption will continue to expand, roughly the pace seen in recent years, fueled by emerging economies such as China.
Capture the Change of Trade War?
However, while analysts polled by Bloomberg give credence to current trade tensions between the United States and China, it seems that if a new trade agreement is not reached from the self-declared deadline of March 2 between the two sides, global demand for oil will really pull out a weaker global economic growth, led by a slowdown in Chinese production and exports. Because the United States and China are the two largest economies in the world, current trade tensions have already hit global supply chains, especially in Asia. Numerous production companies have already emerged from China for greener pastures, including setting up a store in the neighboring Southeast Asian Economic Tiger Vietnam.
Japan, the world's third-largest economy and the main importer of oil and liquefied natural gas (LNG), is already suffering from an economic slump in trade in the US and China. In September, the Nikkei Asian Review "Nikkei Asia" from Tokyo said at least 60% of top Japanese companies expect that earnings will be hurt by the trade war. If Washington and Beijing can not reach the official trade war of March 2, 60 per cent could contain almost all the top Japanese companies, while Japan's GDP will also hit, as oil demands growth in the country.
The continuing trade war between the United States and China will also hit other OECD members. Last month, a group of developed economies downgraded the global growth forecast from 3.7 percent to 3.5 percent in 2019 and 2020. However, the growth forecast is likely to be adjusted if the United States increases existing tariffs for Chinese products worth $ 200 billion, 25 percent, while hitting fresh charges for another Chinese exports of $ 267 billion will aggravate the problem.
From Tim Dice to Oilprice.com
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