Oil: High production and low demand will collapse the market in 2019

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The oil market is substantially corrected to the end of the year and is not optimistic. Based on the forecasts of international energy institutions, it can be concluded that next year the market expects a surplus of oil. In particular, predicts OPEC production growth outside the cartel and falling demand for oil. According to the cartel, demand is 98,79 million barrels, the total production of the countries outside the cartel will increase to almost 62 million barrels per day.
Thus, while OPEC and Russia will limit their production, USA, Canada, Kazakhstan, Brazil and a number of countries will increase, creating pressure on the quotes and offsetting the effect of the agreement. In this regard, in the first half of the year, oil prices may fall below current marks ($50 per barrel). In the most pessimistic case, the price of Brent crude oil falls to $35 per barrel, WTI – up to $30 per barrel.
Demand will decline because of slowing economic growth the main consumers of raw materials, including China. The geopolitical situation in the world is heating up, coupled with the growing instability in the financial markets, primarily American, it can lead to a decline in the growth rate of the global economy. In this case, the drawdown of demand will be more significant than OPEC forecasts. The surplus of raw materials in conditions of declining demand will be difficult to eliminate through reduction in oil production by OPEC.
It is likely that falling prices prostimulirujte the creation of new regulatory agencies on the basis of OPEC. The new structure and its solutions can change the situation on the market, but only in the case of recovery of demand for oil. If these two factors coincide, then at the end of the year the price of Brent crude oil will try to climb above $60 per barrel.
In the baseline scenario, the average price of Brent crude oil in 2019 will be $55 per barrel. In this scenario we are laying a moderate decrease in demand and moderate growth in US production, and execution of the agreement OPEC+ 100%.
Anna Kokoreva,
The Deputy Director of analytical Department,