Despite a slight recovery in oil prices on the last day of 2018, the benchmark was set for the first overall annual decline since 2015, Reuters reported, noting since the start of trade in Asia today, Brent crude and West Texas Intermediate have risen about 1 percent each.
There seems to be too much uncertainty around oil for a stronger recovery, after prices began to decline in early October, after earlier this year rallied to above US $ 80 per barrel for Brent, although short. Concerns about global economic growth and subsequent steps in the US-China trade war are some of the main factors at play. OPEC's latest decision to start cutting production starting in January is also a consideration, although price trends from the past few months have shown markets disappointed with the rate of cuts.
President Trump has indicated an agreement with China may be underway, but uncertainty is likely to last until the agreement is announced. The trade agreement between the world's biggest oil producer and one of the biggest consumers will certainly be bullish for oil, as does the improving global economic outlook – also related to agreements between the United States and China.
In fact, despite the overall losses this year, crude oil benchmarks were seen by investment bank analysts to immediately begin to rise. A Bloomberg survey among analysts showed sentiment would change in the new year, with consensus about Brent crude at US $ 70 per barrel.
According to participants in the survey, oil demand will remain strong in 2019, OPEC cuts will work to support prices, and production losses in Venezuela and Iran will strengthen the bullish effect.
"We can even see something similar to the V-shaped recovery next year, in two very important conditions," said Barclays' Michael Cohen, adding that the conditions were "One, that the reduction in OPEC exports leads to a reduction in inventory. And second, that we don't see further decline in macroeconomic conditions. "
By Irina Slav for Oilprice.com
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