Mubasher: Oil prices may rise towards the end of the year as demand picks up in November and December, Citigroup has said.
Oil at $80 per barrel (pb) is a “realistic” average price, Citi’s global head of commodities research Ed Morse told Bloomberg on Tuesday, noting that a rise to $90 or $100 pb was possible if disruptions worsen the supply crunch amid rising consumption.
Brent crude passed the $85 pb mark at the beginning of October before it began to decline after the United States’ sanctions on Iran came into effect.
On Tuesday, Brent traded 0.44% lower to $72.85 pb, while US crude (Nymex) slipped 0.06% to $63.06 pb by 2:55 pm GMT. Oil prices were also down earlier in the day.
Morse’s forecast coincides with mixed signals from the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC members such as Russia, which recently said it may increase production. An OPEC committee recently said it may cap supply once more next year.
The market is also witnessing growing uncertainty, particularly after the enforcing of the US’ sanctions against the country earlier this week. The US granted waivers to eight countries, allowing them to continue to purchase oil from Iran.
Citi’s top analyst told Bloomberg that he expects Iran to continue selling about 1 million barrels per day (bpd), noting that the waivers don’t allow unlimited purchases.
“How much oil is being granted from Iran to each of those eight countries? We can only surmise until we get a tweet from somebody in the government.”
Morse also expects supply disruptions from some OPEC members such as Nigeria, Libya and Venezuela. Elections will begin soon in Nigeria, and Morse said that there were “always disruptions and they average about half a million barrels a day.”
For 2019, Citigroup expects demand to change amid slower economic growth, which would likely impact the use of energy.
“Longer term, there are lots of road blocks to demand. I think demand at stake is maybe 500,000 barrels a day lower next year than this year,” Morse concluded.
OPEC members are scheduled to meet in Vienna on 6 and 7 December 2018.
