Brent crude seen between $60-$70/bbl in the longer run – UOB

Researchers at UOB Group in the Quarterly Global Outlook suggested the barrel of European reference Brent crude is expected to navigate between $60 and $70 within the next year.

Key Quotes

“Amidst the higher trade tariffs, we can expect China’s GDP to drop below 6% next year. Concurrently, both Germany and Japan may suffer technical recessions across the turn of the year. As for the US economy, we can expect growth to ease from 2.5% this year to about 1.3% next year. Overall, this global synchronized slowdown will reduce crude oil demand and likely weigh on energy prices”.

“On the other hand, there are several positive drivers that appear to help Brent Crude Oil establish some near term support around USD 60 / bbl. The on-going OPEC production discipline seemed to be enforced with existing production limits. As such, despite the overall global growth slowdown, the backwardation in Brent Crude Oil futures curve has returned to a more healthy level”.

“In the US, West Texas Intermediate (WTI) also appears to have stabilized just above USD 55 / bbl. US crude oil rig count continued its trend like drop, falling to 738 for the week ending 6 Sep, from the peak of just under 900 at the end of last year. This would imply that US production will find it difficult to sustain its historic high going forward. In addition, inventory drawdown at Cushing has been larger-than-expected in recent weeks”.

“Overall, we continue to forecast Brent Crude Oil at USD 60 to 70 / bbl range over the coming four quarters. Meanwhile WTI Crude Oil is likely to stabilize at about a USD 5 / bbl discount to Brent Crude Oil“.