Oil: Current supply and demand conditions suggest a period of lower prices - BBVA
According to Marcial Nava, economist at the Research Department at BBVA, the slowdown in crude oil demand will continue to be the primary factor that determines prices in the short and medium-term. Their forecasts point to a gradual fall in 2019 and 2020.
Key Quotes:
“The uncertainty of our forecasts is dependent on two factors. The first is the progression of trade wars and their impact on world economic growth. The second is the evolution of the conflict between the United States and Iran, which could result in an interruption of the flow of oil through the Strait of Hormuz (through which 21% of the oil consumed worldwide passes) or a recovery of Iranian oil exports in the event of an agreement.”
“The outlook for OPEC is bleak. Despite production cuts, the price of Brent crude oil remains below $70 per barrel. Production is at its lowest point since 2015, due not only to voluntary cuts but also to structural and geopolitical factors that have diminished the supply of several member countries.”
“As long as these risks remain contained, the current supply and demand conditions suggest a period of lower prices. In the long term, our estimates point toward an equilibrium price of around $60 per barrel.”
Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
