JP Morgan Drops 2019 Brent Forecast as Platts Survey Shows Most Analysts Predicting Oil in the $70s

Thursday November 22, 2018

While the crude market is currently focused on whether the Organization of the Petroleum Exporting Countries (OPEC) in December will decide to return to production cuts in order to ward off the threat of another global glut, some analysts are trying to determine what will happen in 2019 - and while the general consensus isn't gloom and doom, it's a far cry from the $100 per barrel oil prices they were predicting just months ago.

Scott Darling, head of Asia-Pacific oil and gas at JP Morgan, told CNBC that his firm reassessed its outlook for crude partly because of North American supply ramping up in the second half of next year, and as such it predicts that Brent will average $73 per barrel in 2019, down from the investment bank's previous forecast of $83.50 per barrel.

Darling added that OPEC will need to cut production by 1.2 million barrels per day (bpd) for the whole of next year in order to balance the market.

Top banks and oil brokers surveyed by S&P Global Platts are of similar opinion: they believe Brent will recover to average $75.50 in 2019, down from forecasts of $78.51 in early October.

Morgan Stanley thinks Brent will average $78.13 next year, in a market that is fairly balanced: "Global inventories and spare capacity are still low by historical standards, supporting oil prices; however, we no longer see a further tightening from here on."

Societe General, which believes OPEC will cut crude supply in December to avoid "severe oversupply in 2019", thinks the cartel's initiative will "maintain Brent prices within the desired range of $70-80."

For its part, Barclays is maintaining its 2019 Brent forecast at $72 per barrel and warns of risks skewed to the upside next year, due to the fact that the waivers the U.S. granted to eight countries with regards to the Iran sanctions are only for 180 days and will be readjusted in May.

Notable among the opinions is a sense that the crude market will remain relatively healthy, as exemplified in a note by Michael Wittner, global head of oil market research at Societe General: "Given that the global economy is losing momentum, especially outside the US, oil markets are worried about demand weakness developing.

"However, there is little evidence of this so far."

The cool-headed assessments of the crude market are in stark contrast to remarks made earlier this week by Fatih Birol, executive director of the International Energy Agency: he told media, "We are entering an unprecedented period of uncertainty" due to instability and a fragile global economy."