Crude oil: Market’s cautious turn is overdone - UBS
|In the forecast report for 2019, the Investment Research Team at UBS, estimates Brent crude oil (USD/bbl) at 80.0 is six months and at 75.0 in 12 months and the WTI at 73.0 in six months and 68.0 is twelve.
Key Quotes:
“Since climbing to a four-year high, oil prices have been pressured in late 2018 by rising US oil inventories and rapid supply growth. Production is at record levels in the US and at post-Soviet highs in Russia. Deteriorating macro and trade dynamics are likely to curb demand growth in 2019.”
“The Trump administration has recently displayed some sensitivity about how its policies have affected prices. But we believe the market’s cautious turn is overdone.”
“US sanctions cut a million barrels of Iranian oil from the market at the end of October, a number that will increase. Saudi Arabia has vowed to maintain an equilibrium, but this will push global spare capacity to a 10-year low. And US shale production will be tempered by distribution constraints, with new pipelines only expected to come online in the second half of 2019.”
“On balance, we keep a positive view on crude. Provided OPEC maintains production discipline, we see Brent oil prices at USD 75–80/bbl. But a break between members could see higher production levels, in which case we think Brent would likely trade closer to USD 45–60/bbl.”
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