Page 14 - Malaysia Marine & Offshore Industries Directory 2019/2020
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                 Editorial  The oil market will be a tale of two halves in 2019, according to Wall Street forecasters. Oil analysts expect prices to recover in the first six months of 2019, following a sell-off that has slashed the cost of crude by about 40% since October. But in the back half of the year, commodity watchers anticipate new headwinds for the oil market. Overall, Wall Street expects a moderate recovery for oil in 2019. Investment banks see Brent crude, the international benchmark for oil prices, averaging about US$68 - US$73 a barrel next year while forecasts for US crude mostly fall in a range between US$59 and US$66 a barrel. The key drivers behind the anticipated rally in the opening months of 2019 are OPEC policy and North American oil production. OPEC, Russia and several other producers have launched new production cuts that aim to remove 1.2 million bpd from the market. The producers began capping output in January 2017, but lifted the curbs in June 2018 ahead of US sanctions on Iran, OPEC’s third largest producer. The alliance will get a hand in course correcting from Alberta, Canada. Officials there have ordered producers to slash output by 325,000 bpd in order to drain brimming stockpiles of oil. Storage tanks have filled up because the province does not have enough infrastructure to transport crude. Pipeline bottlenecks are also putting a lid on US production growth. Takeaway constraints in the nation’s top Source: Platts, SR Analysis shale field, the Permian Basin underlying western Texas, are largely expected to persist at least through the first half. But in the back half of 2019, US output flips from a bullish boost to bearish drag in oil markets. Once new pipes start bringing Permian oil to market, American output is expected to surge and put fresh downward pressure on crude prices. OPEC could offset that surge by extending its production cuts, which expire in June. The alliance will meet in April to determine whether market conditions warrant keeping the curbs in place. Economic risks could also cause oil to spike or slump beyond the anticipated range. Analysts see economic growth remaining fairly robust in early 2019, supporting an increase in fuel demand. However, growth is expected to slow heading into 2020. The biggest economic risk is that tit-for-tat tariffs between the US and China devolve into a full-blown trade war. The world’s two biggest economies could impose tariffs on all goods shipped between the two behemoths if they do not clinch a final deal in the coming months. An economic slowdown in China could have significant impacts on energy markets because Asia is the engine of oil consumption, while demand is fairly anaemic in developed Western countries.  10 

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