Oil: Year-end price forecast at USD60/b - Deutsche Bank

According to analysts from Deutsche Bank, solid global demand and production caps by OPEC and its allies are likely to push the price higher but they warn that newsflow will be important.

Key Quotes: 

“Our end-2019 oil price forecast is USD60/b (WTI). Price rises since June 2017, which took WTI up to USD76/b, were followed by a steep decline in October and November to around the USD52/b level and then a further leg-down in December. This decline was interpreted as a sign of weakness in the global economy, fueling investors’ fears of an end to the multi-year bull market in equities.”

“It is important, however, to disentangle the real reasons for the late-2018 oil price decline. Rather than a sudden decline in expected demand growth, it was mainly a higher-than-expected supply outlook that drove prices down, particularly as it became clear that the U.S. sanctions against Iranian oil production would be less stringent than anticipated.”

“On the demand side we see a very limited risk of a recession over the next 12 months and think that Chinese demand is likely to remain resilient to rather slower Chinese GDP growth. Overall, global demand for oil could increase by around 1.4mn b/d. On the supply side, we expect an OPEC production cap to be maintained into 2019. Additionally, North American oil production may be hampered by pipeline constraints and bottlenecks in transportation until at least Q3 of 2019, leading us to believe that the current excess in supply will diminish, while global demand for crude oil keeps expanding – helping pull oil prices higher during the course of 2019. “