Sharp Price Retreat May be Good Thing

Sharp Price Retreat May be Good Thing
The sharp retreat in price may turn out to be a good thing, according to Wood Mackenzie.

The sharp retreat in price may turn out to be a good thing, injecting a healthy dose of reality to the industry at just the right time.

That’s what Wood Mackenzie’s (WoodMac) Chairman and Chief Analyst Simon Flowers stated in his latest The Edge column, which was published on WoodMac’s website on Tuesday.

In the column, Flowers said Brent over $80 per barrel “always seemed too good to last, defying the fundamentals”. The WoodMac analyst also confirmed in the column that WoodMac expects Brent to average $66 per barrel in 2019.

“That’s a tad down on 2018 though still a price that allows companies to generate free cash flow and continue to strengthen finances,” Flowers stated in The Edge.

In a CNBC video interview on Wednesday, Edward Bell, a commodity analyst at Emirates NBD, outlined that a $60 to $70 per barrel range for Brent in 2019 looks realistic.

“I think it’s very unlikely that we’ll get Brent prices for instance going back up to those mid-October highs over $80 a barrel,” Bell said in the interview.

“Looking ahead to 2019, a range somewhere in the $60 to $70 kind of range for Brent probably looks more realistic and WTI, I think that WTI Brent spread looks like it’s going to be pretty sticky and as prices have come off we’ve seen that pretty much stay entrenched at around $9 to $10 a barrel, so WTI prices holding in around the $50 range,” he added.

The Edge is an exclusive column from Flowers, which draws on the “expertise, intelligence, deep insight and data” from across the WoodMac business, according to WoodMac’s website.

Bell is responsible for Emirates NBD’s view on oil markets, including price forecasting. Prior to joining Emirates NBD, Bell served as senior commodities analyst covering energy, metals and agricultural markets and as a Middle East economist.


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