Brent Crude prices are expected to average $62.50 a barrel next year, down from $65 this year as slowing global economic growth could impact oil demand growth, Dmitry Marinchenko, senior director at Fitch Ratings, told Reuters in an interview published on Friday. Fitch sees Brent Crude prices falling further down in coming years, to average $57.50 a barrel by 2022.
According to the ratings agency, global economic growth will slow down to 2.8 per cent this year and next, compared to 3.2-per cent growth for 2018.
“If the global growth slowdown becomes more pronounced, or even if recession materialises, then demand for oil could fall sharply, which is the main risk for global oil prices,” Marinchenko told Reuters.
Just before OPEC and allies decided in December to launch a new round of production cuts to rebalance the market and support oil prices, Fitch said that “we believe that supply controls will support medium-term oil prices in the range of USD60-USD65 a barrel for Brent crude. In the longer term, we continue to expect prices to fall below USD60/barrel driven by the falls to marginal producers’ full-cycle costs.”
Fitch expects Brent to average $62.50 a barrel in 2020 and $60 per barrel in 2021, reflecting the rating agency’s expectations that OPEC and its Russia-led allies “will manage output to keep average prices above USD60/barrel in the medium term, although its ability to secure prices above USD70/barrel may be limited by US pressure.”
Late last week, Brent Crude was just below the $70 mark—at $69.11, down by 0.42 per cent. WTI Crude was down 0.21 per cent at $61.97. OPEC and partners are meeting in June to review their pact. According to Fitch, the future of the agreement will largely depend on how much supply Venezuela and Iran will be providing to the market at the time. Quotas may need to be revised and readjusted, as oil production in Venezuela will continue to drop, Marinchenko told Reuters.