Saturday, 17 November, 2018

JP Morgan raises oil price outlook, but trims demand-growth forecast

An oil pump operating in the Permian Basin near Midland Texas JP Morgan raises oil price outlook, but trims demand-growth forecast
Jean Garcia | 16 July, 2018, 00:44

Prices also found support from a US stocks report showing USA crude inventories fell by almost 13 million barrels last week, the most in almost two years, reducing overall crude stocks to their lowest since February 2015.

Geopolitical risk factors have played a leading role behind oil's aggressive appreciation in recent months. It was like the same bottom that we had in oil in 1999 at around $10 a barrel. However, the investors fear that the prevailing trade war between China and the U.S. may put a negative impact on the global economy, significantly affecting the demand.

Iran's OPEC governor also told Reuters the rise in oil output by OPEC and its allies, after pressure by Trump to do so, was only 170,000 barrels per day (bpd) in June and would not grow much in 2019, also weighing on economic growth. And while Iran has yet to feel the full impact of renewed USA sanctions, the IEA fears there could be "an even steeper reduction than the 1.2 million barrels per day seen during the previous round of sanctions".

EIA states although global petroleum and other liquid fuels inventories declined by an average of 0.5 million barrels per day (MMBPD) in 2017.

This was even conceded by the IEA, whose head of the oil industry and markets division, Neil Atkinson, told CNBC, "The prospect of higher supply from members of the Vienna agreement ..."

JP Morgan said it expected global oil supply to remain robust despite short-term disruptions, forecasting OPEC supply in 2018 at about 32.9 million bpd.

"We think it would highlight the structural tightness of the market and the lack of options available to deal with it", he added.

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World oil prices of reference marks change moderately and in different directions during the trades on Friday. Production and export operations will return to normal levels within the next few hours.

"The market fell out of bed yesterday as support failed (but was). probably overdone to the downside", said Robin Bieber, technical analyst at London brokerage PVM Oil Associates.

US crude-oil production is set to average 11.8 million barrels a day in 2019, the EIA said in its monthly short-term report published Tuesday.

This time, the market is said to have ignored warnings that a spare capacity crunch could be coming down the turnpike: the International Energy Agency in its latest monthly report stated, "Rising production from Middle East Gulf countries and Russian Federation, welcome though it is, comes at the expense of the world's spare capacity cushion, which might be stretched to the limit".

The IEA maintained its 2018 oil demand growth forecast at 1.4 million bpd, but warned that higher prices could dampen consumption.

Nowadays, the bearish sentiment has taken control in the market as the outlook of a total shut down of Iranian oil exports has weakened, as well as Libyan exports came back online and the Saudi Arabia has rapidly ramped up its production. Leveraged trading is high risk and not suitable for all.

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