According to analysts from Danske Bank, in the short term, the main risks to oil price forecasts include a further rise in tensions between the US and Iran on the upside and further escalation in the trade war on the downside.
“The oil market balance still looks relatively tight. On the supply side, OPEC+ is implementing the output cuts agreed in December 2018 and has already begun discussing a possible extension from June. Output in Venezuela is in freefall and Libyan oil output is now at risk following an insurgence. Furthermore, waivers on Iran sanctions expired at the start of May. The macro backdrop remains relatively weak, highlighted by weak macroeconomic data and sluggish global trade growth. To make matters worse, a trade deal looks unlikely before H2. The US is creating some relief on the supply side through selling off 5m bbl in strategic reserves in May.”
“We expect oil prices to recover further over the course of 2019. We forecast Brent will average USD70/bbl in Q2, rising to USD80/bbl in Q4. We expect OPEC+ cuts and a recovery in global growth, along with a US-China trade deal, to be the main factors underpinning a higher oil price in H2.”