Average price of oil will drop to $67 per barrel in 2019

Average price of oil will drop to $67 per barrel in 2019

Average price of oil will drop to $67 per barrel in 2019

Saudi-led OPEC and Russian Federation agreed on December 7 to curb their total crude oil production by 1.2 mbpd beginning on January 1 for six months, but the plan so far has had little impact on crude prices.

Oil has gained almost 12 per cent since last Monday, its biggest week-on-week rally since early December 2016.

Brent crude LCOc1 futures rose $1.47 to $58.53 a barrel, a 2.6 percent gain, as of 11:12 a.m. EST (1612 GMT).

Oil Graph

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading marginally higher on Tuesday after finishing mixed the previous session.

"Momentum is coming back into the market from very depressed price levels", Petromatrix strategist Olivier Jakob said.

But looming over the OPEC-led cuts is a surge in US oil supply - now the world's top producer - driven by a steep rise in onshore shale drilling. Meanwhile, crude oil output in the United States is expected to rise by a further 1mln barrels per day in 2019, with capacity constraints envisioned to ease in the second half of the year as new pipelines come onstream,"the WB says in the report".

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As a result, US crude oil production C-OUT-T-EIA rose by a whopping 2 million barrels per day (bpd) a year ago to a world record 11.7 million bpd.

"The oil market continues to rally as the OPEC and non-OPEC production cuts are taking effect, reducing the oversupply situation that we've been seeing in the market", said Andrew Lipow, president of Lipow Oil Associates in Houston. USA crude inventories at Cushing, Oklahoma, the delivery point for United States crude futures, fell by 565,000 barrels from last Tuesday to Friday, traders said, citing data from market intelligence firm Genscape. A resolution has widely been viewed as potentially supportive to crude prices because tariff spats have helped to hamstring expansion in the world's second-largest economy China, also one of the biggest importers of crude.

Traders hoping for a fast end to the trade dispute were encouraged late Monday by comments from U.S. Commerce Secretary Wilbur Ross who said that Beijing and Washington could read a trade deal that "we can live with".

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Crude oil reversed early gains on Monday after Goldman Sachs downgraded its oil price forecasts for 2019, citing a surge in global production and surprisingly resilient USA shale growth.

S&P Global Ratings said it had lowered its average oil price forecasts for 2019 by $10 per barrel to $55 and $50 per barrel, respectively.

Goldman said the cuts would result in a gradual increase in spot crude prices in 2019 as high inventories revert to their 5-year averages.

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