2019 demand outlook for oil darkens: Poll

Headwinds to global growth due to US- China trade war cited as reason

Bengaluru, Oct. 31: Oil is likely to stay above $ 75 a barrel, fueled by supply disruptions exacerbated by US sanctions on Iran, but further gains could be limited as economists and analysts see demand growth slowing next year due to trade wars and economic weakness.

A survey of 46 economists and analysts forecast Brent crude to average $ 76.88 a barrel in 2019, up from the $ 73.75 forecast in September. The price is expected to average $ 74.48 in 2018, versus the $ 73.57 average so far this year.

Analysts who spoke to Reuters said demand is expected to decelerate in 2019, if concern over widespread economic slowdown proves to be justified.

Overall, global oil demand is projected to grow by between 1.1 and 1.5 million barrels per day ( bpd) in 2019, a range that generally falls short of the 1.4 million bpd forecast for next year by the International Energy Agency in October.

Brent neared $ 87 a barrel earlier in the year following US efforts to isolate Iran through renewed sanctions, but prices have since edged off those highs and Brent is now around $ 76.

Analysts worry that there is a lack of spare capacity to deal with potential outages elsewhere once the sanctions take effect on November 4.

“On the supply side, concerns ( about) falling supplies from a number of Opec producers — primarily Iran, owing to the renewed US sanctions — and also Venezuela, Angola, Libya and Nigeria, will maintain upward pressure on prices,” said Cailin Birch, an analyst at the Economist Intelligence Unit.

The sanctions against Iran’s crude exports are expected to tighten supply, especially to Asia, which takes most of the country’s shipments.

Apart from Saudi Arabia and Russia, few producers can fill any gap left by Iran, according to Frank Schallenberger, head of commodity research at LBBW. “I expect ( Saudi Arabia and Russia) to raise output if necessary - as a shortage on the supply side and an even higher oil price could be a major risk to the global economy in 2019,” Schallenberger added.

Despite concerns about supply, analysts said headwinds to global growth could hurt demand in the coming year, particularly as the US and China engage in a trade war that has imposed billions of dollars in tariffs on each other’s goods.

Brent neared $ 87 a barrel earlier in the year following US efforts to isolate Iran through renewed sanctions, but prices have since edged off those highs and Brent is now around $ 76.

Analysts worry that there is a lack of spare capacity to deal with potential outages elsewhere once the sanctions take effect on November 4.