Concerns about faltering global oil demand and expectations of rising U.S. crude oil exports trump fears of supply shortage after the attacks on Saudi oil and have investment banks predict that oil prices would not move much higher in the fourth quarter, a poll of 13 major investment banks by The Wall Street Journal showed on Friday.
Although the attacks on Saudi oil infrastructure on September 14 knocked 5.7 million bpd—or 5 percent of global oil supply—offline, Saudi Aramco is busy reassuring the market that full capacity is back online and not a single shipment of crude oil will be missed.
According to the WSJ poll, banks expect Brent Crude prices to average US$64.31 a barrel in Q4, basically unchanged from last month’s poll estimate. WTI Crude prices are forecast to average US$58.24 per barrel in Q4, slightly up from last month’s estimate of US$57.82 per barrel, the WSJ poll showed.
As of 08:30 a.m. EDT on Friday, Brent Crude was down 1.1 percent at US$61.06 and WTI Crude was down 0.9 percent at US$55.90, with both benchmarks headed for a weekly loss, due to a faster than expected Saudi oil comeback, rising U.S. commercial inventories, and slowing Chinese economic growth that rekindled fears of slowdown in oil demand growth.
The WSJ poll also showed that the major investment banks expect oil prices to be lower in 2020 than in the fourth quarter of 2019. Brent Crude is seen averaging US$61.95 per barrel next year, and WTI Crude is forecast to average US$56.55 a barrel.
Further slowing global economic growth and rising takeaway capacity out of the Permian to the U.S. Gulf Coast for exports will be two key drivers of the oil market later this year and at the beginning of next year, Harry Tchilinguirian, Head of Commodity Research at BNP Paribas, told The Journal.
The United States is expected to emerge as “a super exporter,” and this wave of new supply will put downward pressure on oil prices, Tchilinguirian said.
Some analysts, however, caution that the market is underestimating the supply security risk in the aftermath of the attacks in Saudi Arabia.
“Participants are clearly not concerned about Saudi supply, with Aramco reportedly returning production quicker than anticipated. Nor do they seem overly concerned with the risk of further such attacks in the future,” Warren Patterson, ING’s Head of Commodities Strategy and Senior Commodities Strategist Wenyu Yao, said on Friday.
“We continue to believe the market is underpricing the current geopolitical risk,” ING’s strategists said.