Strong oil market fundamentals and mounting geopolitical threats led Brent Crude Oil prices to increase in recent weeks. The price of Brent Crude Oil, however, could not breach the USD 80 per barrel psychological mark as it did in late May. On 6 July, oil prices traded at USD 75.1 per barrel, which was up 2.5% from the same day last month. The benchmark price for global crude oil markets was 12.5% higher on a year-to-date basis and was up 54.7% from the same day last year. The U.S. is pressuring Iran’s oil buyers to “reduce to zero” their oil imports from the country by 4 November, triggering undersupply fears. These concerns a re exacerbated by Iranian threats of cutting off regional oil exports. Around 30% of global oil exports pass through the Iranian coast. Venezuela’s oil production, furthermore, continues to slip, and drawdowns in U.S. crude inventories remain high, adding upward pressure on oil prices. Saudi Arabia, however, pledged to increase supply as early as in July to alleviate shortage concerns. Moreover, OPEC and Russia declared that they will reduce their compliance level to the oil cap deal from around 150% to 100%, which implies an injection of around 700,000 barrels per day. Despite the rally, our panelists foresee that oil prices will decline further down the road due to the planned increase in supply by OPEC and Russia, and strong shale oil production in the United States. FocusEconomics panelists see prices averaging USD 72.6 per barrel in Q4 2018. For Q4 2019, they expect prices to average USD 69.9 per barrel. Fears about supply shortages and strong demand for oil led 27 panelists to upwardly adjust their Q4 2018 forecasts compared to last month. 10 forecasters kept their projections unchanged, while 2 cut their forecasts. With numerous developments impacting the oil market simultaneously, the spread between the minimum and the maximum oil price forecasts remains relatively large. The panelist forecast range for Q4 2018 runs from a minimum of USD 64.0 per barrel to a maximum of USD 82.0 per barrel.
WTI Crude Oil prices hit their highest level since November 2014 on 26 June on the back of a tightening U.S. oil market and political tensions with Iran. In the following days, prices fell slightly, trading on 6 July at USD 73.8 per barrel. The print was up 13.9% from the same day last month and was 22.0% higher on a year-to-date basis. Moreover, the price was up 62.1% from the same day last year. Oil prices rallied from the second half of June following a soft patch at the end of May, when prices were aff ected by oversupply concerns. Since then, declining inventories in the United States and fears that the U.S.-led sanctions against Iran could reduce global oil output propelled WTI Crude Oil prices. Moreover, a U.S. economy fi ring on all cylinders is ensuring strong demand for oil. In the fi rst days of June, oil prices moved sideways, and, according to a release from 5 July, the United States unexpectedly posted a small crude build of 1.2 million barrels per day in the week ending 29 June. Moreover, U.S. President Trump is pressuring OPEC countries to pump more oil to lower prices, further rattling oil markets. Looking ahead, FocusEconomics panelists see prices for WTI Crude Oil declining as the U.S. oil shale boom and higher supply from key producers will more than off set strong demand for the black gold and geopolitical risks. For Q4 2018, analysts expect prices to average USD 67.5 per barrel. They see prices decreasing slightly, to USD 66.7 per barrel, in Q4 2019. Oil prices are showing strong resilience despite mounting oversupply fears, driving analysts to upgrade their year-end forecasts: This month, 17 panelists upgraded their projections for Q4 2018 from last month. Conversely, 3 cut their forecasts, while 8 forecasters left their projections unchanged. The spread between the maximum and minimum price forecast for oil remains large due to increasing uncertainty regarding the outlook of prices. For Q4 2018, the maximum price forecast is USD 80.0 per barrel, while the minimum is USD 57.0 per barrel.
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