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Page added on May 27, 2018

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What Will Happen to Oil Prices In 2019?

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Analysts at Bank of America Merrill Lynch issued a forecast in May claiming that oil prices over the next year can rise as high as $100 per barrel. Among the reasons behind the increase are the US withdrawal from the Iran deal and problems on the Venezuelan oil market.

The oil prices have been on a steady rise since June 2017 and are approaching the $80 per barrel mark, with Brent Crude hitting $79.84 on May 23.

‘Geopolitics Dominating Market Again’

According to assessments by Bank of America Merrill Lynch, the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA), also known as Iran deal, decreasing oil output in Venezuela and the OPEC+ agreement will drive the oil prices even further in 2019, with the possibility of reaching $100 per barrel.

Goldman Sachs Group Inc. agrees that these factors will affect oil prices, but suggests that Brent futures could reach $82.50 per barrel by summer, but are likely to decline again in 2019. The CEO of French oil giant Total, Patrick Pouyanne, also expressed his opinion that $100 for a barrel won’t come as a surprise, noting that the world has entered “a new world […] where geopolitics are dominating the market again.”

US President Donald Trump announced on May 8 Washington’s withdrawal from the JCPOA, a deal that was reached in order to secure the peaceful nature of the Iranian nuclear program in exchange for lifting sanctions. The US is planning on re-imposing sanctions against Iran and against any company that does business with the country.

Venezuela has been reducing its oil output in recent months amid an ongoing economic crisis and US sanctions against Caracas. Its president, Nicolas Maduro, announced the release of a state-backed cryptocurrency, the Petro, aimed at helping the country sell its oil and to circumvent sanctions.

OPEC+ Policy

The OPEC+ agreement to decrease oil production has been in effect for 1.5 years and has managed to raise the oil prices after taking a nosedive in 2014. It is so far unclear whether the agreement will be adapted to the new reality, where oil prices have almost reached the $80 mark. During a meeting in April, OPEC members announced that the countries intend to maintain the production cap until the end of 2018. However, the CEOs of Russia’s Lukoil and Gazprom have recently expressed their opinion at the Economic Forum in St. Petersburg that with such oil prices, it is time to make the OPEC+ agreement more flexible.

OPEC countries, along with Russia and 10 other non-members (OPEC+), agreed on production cuts in September 2016 in a bid to raise oil prices to the pre-2014 level. The agreement was prolonged in December 2017 for one year.

Risks of “$100 per Barrel”

Analysts at Switzerland’s UBS Bank have already drawn a picture of world oil prices reaching $100 per barrel. According to them, such a sharp rise in prices will result in the global economy loosing 16 basis points of growth, which is equivalent to $100 billion. Besides, the analysts believe that the current trend in oil prices may mark the beginning of a new recession in the US.

“We should take seriously the possibility of an oil price spike — not least because oil spikes preceded 5 of the last 6 recessions [in the US],” the UBS report says.

The report notes that the current spike is only the 11th sharpest in the history of oil prices, but adds that this could change at any moment.

Sputnik



15 Comments on "What Will Happen to Oil Prices In 2019?"

  1. Davy on Sun, 27th May 2018 6:21 am 

    $100 oil is not so bad until you include the fed hikes. You then are looking at measurable macro tightening. Personally I think an old fashion recession is needed. The problem is anymore can the central bank management accommodate a recession? It is likely they can’t. Remember this is a global issue now. All central bank policies are intertwined indirectly and directly. We surely can’t survive a strong recession. There is now too much debt. A very slight recession from fed tightening and higher oil prices may not be the straw that breaks the camel back but it is getting close.

  2. Twocats on Sun, 27th May 2018 7:45 am 

    Never have asset classes been so correlated. But never has “the market” been so separate from the real world. And if a bunch of people with no savings and no prospect s suddenly can’t afford to survive … Who cares. There’s no housing bubble to pop this time. So from what I can see high oil prices are good for the system. Props up some of the bigger bubbles that are around… Like the shale oil bubble and the pension fund Ponzi.

  3. BobInget on Sun, 27th May 2018 10:22 am 

    Should, I believe refinery rates will rise above 5 M B, $100 crude won’t wait till 2019.

    https://www.bloomberg.com/news/articles/2018-05-27/opec-committee-is-said-to-see-oil-stockpiles-below-5-yr-average

    Onlyist thing. A ‘C Note’ ain’t what it was in 2014.
    I’ll predict $135. by Xmass.

  4. Manila1 on Sun, 27th May 2018 2:41 pm 

    Did you know that the Ps has a higher foreign currency reserve than the US? ($69.5B vs $44B)

    “https://www.theburningplatform.com/2018/05/27/the-countries-with-the-most-foreign-currency-reserves/#more-177099China tops the list with a solid $3.2 trillion in reserves held:”

    And the beat goes on…

  5. Boat on Sun, 27th May 2018 2:47 pm 

    Manila

    The P’s population die 10 years earlier than most developed nation’s. Thanks for doing your part.

  6. Manila1 on Sun, 27th May 2018 3:10 pm 

    Boat: Most Americans spend that last 10 years on many expensive drugs, warehoused in old folks homes. Alive, but not living. Also, life expectancy in shrinking in America while it is still growing in the Ps.

    https://www.theatlantic.com/health/archive/2017/12/life-expectancy/548981/

    BTW: Life expectancy…
    Monaco = 89.4 years ( #1)
    USA = 80.0 years (#43)
    Ps = 69.4 years (#162)

    https://www.cia.gov/library/publications/the-world-factbook/rankorder/2102rank.html

    Age is not the deciding factor for a good life. Your culture and the ability to enjoy life is.

  7. Davy on Sun, 27th May 2018 3:17 pm 

    Shut up 3rd world, age is a deciding factor for a good life in addition to a quality of life. Why do you think you are so obsessed with a long life. You will regret moving to a shithole town in the 3rd world pushing 80.

  8. MASTERMIND on Sun, 27th May 2018 3:45 pm 

    Poor Trumpflake!

    https://imgur.com/a/P84i3FO

  9. Outcast_Searcher on Sun, 27th May 2018 4:04 pm 

    Davy ” We surely can’t survive a strong recession.”

    Why not? It’s not like we haven’t survived strong recessions many times before. Just look at the last few global financial panics.

    It’s not fun, but that does NOT mean it’s doom just because fast crash doomers are constantly crying “dooooooom” as they have incorrctly been doing for several decades.

    For one thing, a “strong” global recession would likely mean back to ZIRP, and remove the “threat” of normal interest rates (which would be a good thing in a normal economy) your ilk is so worried about.

  10. Cloggie on Sun, 27th May 2018 4:15 pm 

    Jeez milli, battery man has edgy opinions!

    https://twitter.com/elonmusk/status/1000560049389907969

  11. Davy on Sun, 27th May 2018 4:29 pm 

    OS, I hope we can but with so much debt, unfunded liabilities, and stretched safety nets I am not sure. Your optimism is excessive and dated IMO. When I say not survive this does not necessarily mean a complete collapse. We might see a slower unravel of the status quo into more dysfunction and economic abandonment in a process.

  12. MASTERMIND on Sun, 27th May 2018 4:31 pm 

    Outcast_Searcher

    Zirp hasn’t done anything besides create bubbles..Growth is over..And the collapse will be fast, and it will happen at the speed of technology..In the form of an electronic bank run.Likely on the money markets..Think world trade centers coming down..That is an example of a collapse..

    Sleepwalking Into The Next Oil Crisis
    https://www.forbes.com/sites/rrapier/2018/03/23/is-the-world-sleepwalking-into-an-oil-crisis/#509edc8b44cf

    According to the German Army leaked study. When the oil shortages hit, Wall street will crash, the public will lose all faith/trust in their institutions, and the global economy and world governments will collapse..
    http://www.energybulletin.net/sites/default/files/Peak%20Oil_Study%20EN.pdf

    Scientific American: Apocalypse Soon: Has Civilization Passed the Environmental Point of No Return?
    https://www.scientificamerican.com/article/apocalypse-soon-has-civilization-passed-the-environmental-point-of-no-return/

    Inside the new economic science of capitalism’s slow-burn energy collapse (Ahmed, 2017)
    https://medium.com/insurge-intelligence/the-new-economic-science-of-capitalisms-slow-burn-energy-collapse-d07344fab6be

    Peer Reviewed Study: Society Could Collapse In A Decade, Predicts Historian (Turchin, 2010)
    https://www.nature.com/articles/463608a

    NASA Peer Reviewed Study: Industrial Civilization is Headed for Irreversible Collapse (Motesharrei, 2014)
    http://www.sciencedirect.com/science/article/pii/S0921800914000615

    The Royal Society: Peer Reviewed Study, Now for the First Time A Global Collapse Appears Likely (Ehrlich, 2013)
    https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3574335/

    Peer Reviewed Study: Limits to Growth was Right. Research Shows We’re Nearing Global Collapse (Turner, 2014)
    https://www.scribd.com/document/379418787/Is-Global-Collapse-Imminent-An-Updated-Comparison-of-The-Limits-to-Growth-with-Historical-Data-Turner-2014

    Peer Reviewed Study: Financial System Supply-Chain Cross-Contagion: Global Systemic Collapse (Korowicz, 2012)
    http://www.feasta.org/wp-content/uploads/2012/06/Trade-Off1.pdf

  13. MASTERMIND on Sun, 27th May 2018 4:35 pm 

    Clogg

    I am loving that Musk is trying to go to war with the media..its the media who have made him into everything his is today..This is like Trump going to war with Faux news..Totally counter productive..I think Musk knows Tesla is going to be out of business soon..And he is just lashing out at anyone for no logical reason.

  14. MASTERMIND on Sun, 27th May 2018 4:56 pm 

    Permian Producers Are Struggling To Make Money

    https://www.forbes.com/sites/rrapier/2018/05/27/permian-producers-struggle-to-make-money/#da3697ec5698

    No one in the Permian is making any money…FAIL..

  15. pat on Mon, 28th May 2018 5:30 am 

    the oil prices will race to 110, 140 dollar the previous highs once the 80$ mark is broken convincingly. oil prices are only going one way that is up with the world cheap, high quality easy oil gone demand for the last drops of black glue, tar sands, costly oil to rise unprecedently. 100$ oil will look like 60 dollar oil when it will cross 120-130 in absolutely no timeeeee. prepare……

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