Crude oil prices will rise to $70 a barrel next year, a leading consultancy predicts.
Capital Economics in London said it has increased its forecast to $70 a barrel from $65 as global oil supplies will be constrained even as the world economy picks up in 2020 as central banks keep interest rates low.
“We expect that global oil supply will remain constrained in 2020. But we also forecast somewhat stronger growth in demand next year and a pick-up in risk appetite on the back of monetary easing. As a result, we are raising our forecast of the price of Brent crude at end-2020 to $70 per barrel,” said the firm’s Caroline Bain, adding that it nonetheless does not see any significant increase in demand.
It sees oil demand rising to 1.1m barrels a day, up from 800,000 barrels this year.
“By March, prices are unlikely to be high enough to convince OPEC that it should ramp up production. Moreover, there appears to be little prospect of a lifting of US sanctions on Iran and Venezuela, which means that their production and exports will remain low,” she said.
Capital Economics said a limited amount of new supply from non-Opec nations, including Brazil, will come onstream next year.
“One major risk to our price forecast is the ongoing rise in geopolitical tensions in the Gulf region. However, following the attacks on Saudi oil facilities last month, all sides made an effort to play down the risk of a military conflict. We have not factored an escalation in tensions into our oil price forecast but, if nothing else, it makes us more comfortable with a higher price for end-2020,” it said.