NEW YORK: Brent is expected to average $75 per barrel for 2019, trending at a bullish monthly average of $77 per barrel for the second half of the year, according to Fitch Solutions.
A tightening of supply and the assumption of a high level of compliance by the Opec+ alliance in the first half of the year, are some of the factors supporting the ratings agency’s fundamentally bullish outlook for the oil markets, report agencies."Saudi Arabia is shouldering the bulk of the cut and, as of February, will have removed around 1 million barrels per day of supply from the market. As with the previous round of cuts, this will offset softer compliance elsewhere in the group,” Fitch said. Brent futures recovered early this year, trading at $63.09 per barrel on Monday after plunging to $50.47 per barrel in December, ending a three-year buoyancy in prices, which peaked at $86.29 per barrel in October. The Opec+ alliance led by Saudi Arabia and Russia pledged at the exporter group’s annual meeting in Vienna in December to stop the decline by undertaking 1.2 million bpd of production cuts starting January.
The alliance’s supply cuts as well as the crisis in Venezuela has tightened the market, allowing prices to recover over the past couple of weeks. Sanctions have reduced Venezuela's output to about 1 million bpd. The country used to produce about 3.5 million bpd two decades ago.
Fitch maintains the bullish outlook well into 2020, where it has forecast an annual average of $82 per barrel for Brent, $84 per barrel in 2021 as well as $85 through 2022 and 2023 for the benchmark.
"Adding to this are the impacts of US sanctions on Venezuela and Iran, which will substantially curtail exports across the year, tightening the physical market,” the report said. "A more hawkish approach by Washington could further move the needle on the prices. However, with fiscal stimulus waning and trade tensions lingering, it is unlikely that the government will risk piling added pressures onto the US consumer. Incumbent President Donald Trump will seek re-election in 2020 and gasoline prices are a key voting issue in the states,” it added.