BANKS CUT PRICE OUT­LOOK

2019 Bud­get re­cal­i­bra­tion im­mi­nent if Brent stays around US$60 per bar­rel, says econ­o­mist

New Straits Times - - BUSINESS - AMIR HISYAM RASID [email protected]­di­aprima.com.my

MORE lead­ing global banks are fol­low­ing in Gold­man Sach’s foot­step in low­er­ing the av­er­age Brent crude price fore­cast to US$60-US$65 (RM245-RM266) a bar­rel this year.

This has pushed the con­sen­sus tar­get down to US$70 a bar­rel from US$72 last year.

The new fore­casts are based on the ex­piry of United States’ sanc­tion against Iran in May and un­cer­tain­ties in the in­dus­try due to the US-China trade war.

There was fear in the mar­ket that de­mand for oil would con­tinue to be lack­lus­tre, they added.

An econ­o­mist be­lieves a bud­get re­cal­i­bra­tion is im­mi­nent for Malaysia if Brent crude trades around US$60 per bar­rel for the rest of the year. This is de­spite the Fi­nance Min­istry say­ing the gov­ern­ment would only re­cal­i­brate the bud­get if the oil price av­er­ages US$50 per bar­rel.

The Brent price av­er­age year-to-date is US$57 a bar­rel.

Banks that have cut their fore­casts re­cently in­cluded CMB In­ter­na­tional Cap­i­tal Corp Ltd, Dubai-based Emi­rates NBD, French multi­na­tional in­vest­ment bank So­ci­ete Gen­erale, Ja­pan’s MUFG Bank Ltd and Span­ish multi­na­tional Banco San­tander.

CMB In­ter­na­tional, a wholly-owned sub­sidiary of China Mer­chants Bank, said the sanc­tions against Iran would play an im­por­tant role on oil price and sup­ply.

“We be­lieve un­cer­tain­ties from sanc­tion waivers are still high,” said the in­vest­ment bank, which fore­casts Brent to trade at US$60 to US$65 a bar­rel this year.

It said the oil mar­ket was fol­low­ing the US-China trade ne­go­ti­a­tions closely as lead­ing eco­nomic in­di­ca­tors had ex­hib­ited weak­en­ing sig­nals, which would likely drag down global oil de­mand if the trade war con­tin­ued.

Pu­tra Busi­ness School busi­ness de­vel­op­ment man­ager As­so­ci­ate Prof Dr Ahmed Raz­man Ab­dul Lat­iff said the gov­ern­ment might have to re­cal­i­brate the 2019 Bud­get if the oil price con­tin­ued to av­er­age at US$60 a bar­rel.

“The bud­get was based on an oil rev­enue of US$70 a bar­rel. So if the price re­mains at US$60, the gov­ern­ment has to re­cal­i­brate its bud­get, prob­a­bly by de­lay­ing some of the pro­posed ex­pen­di­tures,” he told NST Busi­ness.

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