By Eileen Soreng and K. Sathya Narayanan
(Reuters) – Oil prices could stall as a slowing global economy squeezes demand and U.S. crude floods the market, despite an expected extension by OPEC and its allies of their output-cutting pact next week, a Reuters monthly poll showed on Friday.
The survey of 42 economists and analysts forecast Brent crude would average $67.59 a barrel in 2019, a downward revision from the $68.84 estimate in May, and just above the $66.17 average for the global benchmark so far this year.
“Currently, the oil market is more focused on the demand side of the story amid rising trade tensions,” ANZ analyst Daniel Hynes said.
A decision by the Organisation of the Petroleum Exporting Countries and other producers on whether to extend their production curbs would “set the supply story” for the second half of 2019 and into 2020, Hynes added.
Analysts forecast global demand to grow by 0.9–1.3 million barrels per day (bpd) in 2019, versus the 1.2–1.4 million bpd forecast in May.
OPEC and the International Energy Agency have also downwardly revised their forecasts for demand growth, putting it at 1.14 million and 1.2 million bpd respectively.
All eyes will now be on a meeting of OPEC and allies including Russia on Monday and Tuesday to discuss an extension in order to support prices.
Most analysts expect the so-called OPEC+ to extend the agreement, although some uncertainty remains over Moscow’s continued cooperation.
“Oil prices could see some upside if Russia agrees to comply, or if OPEC agrees to cut its quotas further,” said Oliver Allen, economist at Capital Economics.
“A decision by OPEC … to roll over its production cuts would probably put a floor under oil prices.”
(Graphic: U.S., Russian, Saudi crude oil production png link: https://tmsnrt.rs/2QYNGAd).
Increasing production from the United States could also keep prices under pressure, analysts said.
“In the medium to long term, we believe that U.S. supply growth will put a cap on oil prices and make it less probable to see prices over $70 per barrel in the absence of supply shocks,” said Adria Morron Salmeron, an economist at CaixaBank Research.
However, analysts still expect prices to be broadly supported by supply issues, such as U.S. sanctions on Iran and Venezuela, and geopolitical risk around tensions between the United States and Iran.
After attacks on oil tankers in the Gulf of Oman widely blamed on but denied by Tehran and the downing of a U.S. drone by Iran, the standoff could escalate to disrupt shipments through the Strait of Hormuz, the world’s busiest oil supply route.
“While Saudi Arabia will likely seek to replace Iranian and Venezuelan barrels and amend the production schedule at the OPEC meeting, recent comments suggest it will only do so retroactively, once supply losses are apparent,” said Michael Haigh, head of commodity research at Societe Generale.
U.S. light crude is seen averaging $59.30 per barrel this year, compared with May’s $60.62 forecast, and the $57.45 average so far this year.
(Reporting by Eileen Soreng and K. Sathya Narayanan in Bengaluru; Editing by Arpan Varghese, Noah Browning and Dale Hudson)