Last time this space talked of the crude oil prices, there was tussle going on between the bulls and the bears. Higher demand for crude by the Asian refineries, sanctions on Iran and Venezuela, and supply risks from countries like Nigeria, Libya, and Algeria were factors supporting the upswing in prices. At the same time, Saudi Arabia’s decision to continue with production cuts has also been keeping crude oil prices afloat. On the other hand, rising inventories amid high production prospects for global oil giants, and slowing global economies have been factors capable of pulling prices in the opposite direction i.e. south.
Though the prices this year have increased by more than 25 percent, year-on-year due to supply curbs by OPEC and other major producers, along with US sanctions on Venezuelan and Iranian exports - and recently Venezuela faced a production halt amid a massive blackout, a second such massive and prevalent blackout in less than a month - surprisingly high stockpiles of US crude oil put a dampener on the global supply cut, and hence crude oil prices. Compared to an expected decline of 1.2 million barrels, US crude inventory increase by 2.8 million barrels!
It seems that the bears have all of a sudden taken over the market for now; but upward sentiments are also not caged. Brent crude oil has been trading above levels seen last year, and big banks expect that the benchmark will continue to inch up.
However, the rally is expected to remain within range due to growing fears of an economic slowdown in Asia, US and Europe too.
EIA forecasts Brent crude spot prices to average $63 and $62 per barrel in 2019 and 2020 respectively, versus an average of $71 per barrel in 2018. Production cuts will continue till at least June 2019 as the April OPEC meeting has been postponed till then. This should be a key driver for prices to not fall below a certain level at least.
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