2019 OPEC Market Forecast
Amid growing uncertainty over the global economic growth rate, energy prices have largely been affected by concerns about crude oil supply glut. However, OPEC Reference Basket (ORB) price was up 33% or 417.35 in 2018 year-on-year. This growth was partly due to agreement between OPEC and non-OPEC allies, which largely rebalanced global markets. Studies conducted on the global economic growth show that the world economy grew 3.7% in 2018 and is set to grow 3.5% this year. So there would be no significant difference in growth year-on-year.The US economic growth has also remained almost unchanged over recent years. It experienced 2.9% economic growth in 2011 and 2016. The euro-zone economic growth rate stood at 1.9% in 2018, which would reach 1.7% this year. There is a similar scenario in Asia’s emerging economies. China, India and Japan have not seen their economic growth rate change year-on-year. This estimate of global economy in 2019 indicates that energy consumption, particularly oil, would remain almost unchanged. Therefore, OPEC will see no significant increase or decrease in oil consumption. Therefore, the oil market situation in 2019 would be largely similar to the oil market in 2018.Meantime, despite the fact that unchanged economic growth in major importers would bring about recession, which would subsequently lead to lower oil consumption, there are other reasons to justify future growing demand for oil in Asia, particularly in India and China. Furthermore, the US is highly likely to face growing demand and the main reason is that strategic oil reserves in US storage tanks have declined. Because when oil prices increased these countries saw their stocks drop. Therefore, in the future, lower oil prices would encourage major buyers to depend on imports.OPEC Obligations According to estimates about financial markets and energy consumption in the countries that buy significant volumes of oil, OPEC has no option but to comply with the following points in order to manage the energy market in the world:Making Efforts for Balance in Global Energy Market: One of OPEC’s objectives in recent years has been to create stability and balance in global markets with a view to serving the interests of producing nations. In light of the decline in oil prices over recent years, OPEC has tried its best to restore balance to the markets and is making efforts to shore up prices through controlling production. Due to the persistence of this policy among OPEC member states and non-OPEC allies, the year 2019 may see full balance in the energy markets. Of course, it depends on a variety of political and economic factors. In case no unpredicted events occur, prices and production levels will see stability. Continued Cooperation with Non-OPEC Producers: Over recent years, OPEC has had close cooperation with non-OPEC major oil producers with a view to controlling production and bringing oil prices as much closer to their real levels. Given the success of such cooperation, OPEC and non-OPEC are likely to reach a longer-term agreement on oil production to formalize cooperation.Shale Oil Production: OPEC member states seeking oil price hike are sensitive to shale oil production in the light of their plans for better oil prices. Most producers of oil favor oil price hikes to the levels that US shale oil production would no longer be economical because the traditional producers of oil are well aware that in case they experience a significant price hike, shale oil production will become cost-effective for such nations as the US, and that is likely to strip them of any control on the oil market.Effective FactorsBased on the current developments, the OPEC oil basket price is likely to vary between $60 and $70 a barrel for all the 15 member states in 2019. However, a number of factors are likely to affect the future of OPEC oil production this year: Impact of US oil sanctions on Iran; Return of political stability to Venezuela; Violation of production cut agreement by some nations like Saudi Arabia; Upward or downward trend in production by some OPEC member states; Higher production by Nigeria and Libya that had been exempted from the global oil production cut agreement; Compliance of non-OPEC producers with production cut agreement; Consensus between OPEC and non-OPEC oil producers on production cut; Occurrence of military confrontation or unpredicted tensions in the strategic oil export shipment routes like the Persian Gulf, Strait of Bab-el-Mandeb; Disturbance in the economic growth of major buyers of oil in Asia; and US political equations with some nations to pressure Iran, Venezuela and Russia.