WoodMac Forecasts 2019 Oil Price

Brent will average $65 per barrel in 2019 and $68 per barrel in 2020, according to Wood Mackenzie’s (WoodMac) latest price forecast.

The forecast was included in an editorial published on WoodMac’s website earlier this week, which revealed that the company expects global oil demand to grow 1.1 million barrels per day (MMbpd) this year and 1.3 MMbpd in 2020 in its base case.

WoodMac also outlined in the editorial that global supply is forecasted to grow 1.4 MMbpd in 2019 and 1.8MMbpd in 2020, “after an estimated increase of 2.5MMbpd in 2018”. This assumes OPEC continues to restrain production through end-2020, however, WoodMac highlighted.

“With non-OPEC supply expected to increase, the OPEC+ cuts are critical to prevent significant oversupply,” WoodMac stated in the editorial.

Sharp December Fall

December’s sharp fall in oil prices was the result of over-selling on fears for global economic growth, according to WoodMac.

“Our analysis indicates the oil market was overbought in October, when Brent reached $85 per barrel, and oversold in December when it dropped back to $51 per barrel. Despite Wood Mackenzie arguing there was ample supply through to the end of 2019, fears of a lack of OPEC spare capacity, concerns of an ensuing supply crunch, and focus on a $100 per barrel end-point back in October led to inflated prices,” WoodMac stated in the editorial. 

“In contrast, December’s sharp fall was the result of over-selling on fears for global economic growth – largely driven by the U.S.-China trade war, and a perception that OPEC would not cut output enough,” WoodMac added.

In the editorial, WoodMac stated that since trading resumed in January, the oil market has “rebounded” as the impact of production cuts from producers such as Saudi Arabia “started to be felt”.

FSMR Forecast

Earlier this month, analysts at Fitch Solutions Macro Research (FSMR) forecasted that the price of Brent will average $75 per barrel in 2019.

FSMR analysts see the average price of Brent rising to $82 per barrel in 2020, $84 per barrel in 2021 and $85 per barrel in 2022.

“The main factors we believe that will support higher prices are the winding down of sanction waivers for Iran and continued strong demand growth from emerging markets outside of China,” the analysts stated in the report.

WoodMac is an energy research and consultancy company, which traces its roots back to 1923. FSMR is a division within Fitch Group. Owned by Hearst, Fitch Group describes itself as a global leader in financial information services.