Demand fears arising from global trade protectionism, increasing supply in Saudi Arabia and Russia, and a possible resurgence in output in Libya weighed on Brent Crude Oil prices in recent weeks. However, additional global supply capacity is thought to only be marginal, while geopolitical tensions remain high in the Middle East, which helped limit price declines. On 3 August, oil prices traded at USD 72.5 per barrel, which was 4.5% lower than on the same day last month. However, the benchmark price for global crude oil markets was up 8.6% on a year-to-date basis and was 37.1% higher than on the same day last year. In recent weeks, trade tensions between the U.S. and China have increased, stoking concerns about the impact an escalated trade war between the two countries could have on oil demand. On 10 July, the U.S. government listed USD 200 billion worth of goods it imports from China for potential tariffs. Later, on 20 July, President Trump threatened to tax all USD 500 billion of U.S. imports from China. Bearish sentiment has been further fueled on the supply front recently: OPEC’s latest Monthly Oil Market Report showed that production in Saudi Arabia and Russia increased in June; while, in Libya, major export terminals and oilfields were reopened in early July. Planned supply increases by OPEC and Russia from July, coupled with strong shale oil production in the United States, will weigh on Brent Crude Oil prices going forward. Although FocusEconomics panelists see prices remaining broadly stable this year, averaging USD 73.3 per barrel in Q4 2018, they see prices slipping and averaging USD 71.2 per barrel in Q4 2019. 5 of our panelists were undeterred by global trade protectionism developments and upwardly adjusted their Q4 2018 forecasts compared to last month. Meanwhile, 33 forecasters kept their projections unchanged, while 2 cut their forecasts. The spread between the minimum and the maximum oil price forecasts remains relatively large, with numerous developments simultaneously affecting the oil markets in recent weeks. 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.
Prices retreated in recent weeks from the multi-year highs recorded at the end of June. Higher global oil supply in June and a surprise increase in U.S. crude inventories in the week ending 27 July fostered bearish sentiment. However, news of strong U.S. economic growth in the second quarter of this year helped limit declines. WTI Crude Oil traded on 3 August at USD 68.5 per barrel, which was 7.7% lower than on the same day last month. However, the price was up 13.3% on a year-to-date basis and it was 39.7% higher than on the same day last year. WTI Crude Oil prices were stable in the mid-USD 70 range in early July before falling on 11 July when OPEC’s Monthly Oil Market Report showed that the organization’s members had collectively ramped up supply in June. Saudi Arabia and Russia led the increases, which more than outweighed declines in Libya, Venezuela and Angola. Moreover, although crude inventories in the U.S. fell throughout most of last month, they unexpectedly picked up in the week ending 27 July. However, support for WTI Crude came from the demand side on 27 July, when data was released showing solid growth in the U.S. economy in the second quarter of 2018. Going forward, FocusEconomics panelists see prices for WTI Crude Oil decreasing as the U.S. oil shale boom and higher supply from key producers should more than offset strong demand for the black gold and geopolitical risks. For Q4 2018, analysts expect prices to average USD 67.7 per barrel. They see prices decreasing slightly, to USD 67.0 per barrel, in Q4 2019. Despite strong global production, 3 of our forecast panelists upgraded their projections for Q4 2018 from last month. Meanwhile, a majority of 27 left their forecasts unchanged, while 3 made cuts to their projections. Various factors in recent weeks have resulted in uncertainty regarding the outlook for oil prices. As such, the spread between the maximum and minimum price forecast for oil remains large. 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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