The kingdom sees $80 per barrel as the average oil price in 2019. File Image / Pixabay
Unsurprisingly given this week's continued price losses for crude, some analysts are forecasting that this could be just the start of an even stormier market; however, one notable exception to this mindset is Saudi Arabia, which has made an unusually bullish call on oil in its new budget.
With growing inventories and record U.S. and Russian output combined with signals of weakening global demand making headlines, Tamas Varga, senior analyst at PVM Oil Associates, said in a research note published Tuesday that "The only way is down: there are lots of variables regarding next year's oil balance, but based on available data, information and sentiment, it is fair to say that any price rally will be met by fierce resistance from the sellers' side."
Vargas went on to speculate that "Some kind of short-covering can happen any time [from] now until the end of the year, but no long-term joy is on the horizon for oil bulls."
UBS Global Wealth Management
Uncertainty and volatility reign once again
UBS Global Wealth Management analysts agreed, and in a research note they stated that "For a brief period, the energy market in 2018 bore all the hallmarks of having stabilized with some sense of normalcy returning, but all that changed in October.
"Uncertainty and volatility reign once again."
But the government of Saudi Arabia has far less gloomy expectations for the near future: it expects that oil will average about $80 per barrel in 2019, as long as its production continues at 10.2 million barrels per day and Saudi Aramco won't increase its allocations to the government.
This is in sharp contrast to 2017, when the Saudis based their 2018 budget on crude averaging $63 per barrel - and Bloomberg noted that the kingdom's bullish call "is the latest sign that [it] expects its efforts to corral OPEC [the Organization of the Petroleum Exporting Countries] members and its allies to cut production next year will support prices."
Of course, the Saudis' 2019 outlook could be a case of wishful thinking: according to Ziad Daoud, chief economist in the Middle East for Bloomberg, the kingdom will need oil to trade above $95 per barrel for the year in order to balance its budget.
Although their ranks are thinning, there remains a small body within the analytical community still inclined to reject common wisdom, one being the International Energy Agency, which last week predicted that the global oil market will tighten (and presumably cause prices to escalate) by the second quarter of next year due to the OPEC cutbacks.