Prices for crude may skyrocket to $100 per barrel as soon as next year as major supply risks in Iran and Venezuela are likely to strain global energy markets, say analysts at Bank of America Merrill Lynch.
According to the bank, Brent futures, currently hovering around $77, will reach $90 in the second quarter of 2019 due to the larger cut in world inventories. However, it’s reported that prices for black gold may soar even higher, as an agreement between the Organization of the Petroleum Exporting Countries (OPEC) and other major producers, including Russia, to slash output is still helping to reduce supply. At the same time, deteriorating conditions in Iran may push prices to $100, a level not seen since 2014, according to analysts.
“Looking into the next 18 months, we expect global oil supply and demand balances to tighten, driven by the ongoing collapse in Venezuelan output,” the report said. “In addition, there are downside risks to Iranian crude oil exports. Plus we see a high likelihood of OPEC working with Russia in 2019 to set a floor on oil prices.”
Brent crude hit the highest level over the past three years shortly after US President Donald Trump announced the US was pulling out the nuclear agreement reached three years ago, and would re-impose its sanctions on the Islamic republic. Iran reportedly produces four percent of global oil supplies with daily output of about 3.8 million barrels.
The analysts expect OPEC and Russia to gradually scale down the amount of oil they are holding off the market by 450,000 barrels a day next year. However, if the allies do not step back from their current agreement to withhold 1.8 million barrels day, global markets will get tighter and prices will spike.
The bank says Venezuela's production will drop by 500,000 barrels a day over the following 20 months, but a major drop in Iranian exports is excluded from the forecast. If a new nuclear pact is not sealed within next six months, global oil markets will tighten further. According to the experts’ projections, daily oil consumption across the globe will increase by 1.5 million barrels in 2018 and 1.4 million barrels next year.
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