Crude oil prices could decline further and remain low if OPEC members fail to maintain curbs in total production in 2019, American investment bank and financial services firm, J.P. Morgan, said Wednesday.
“... J.P. Morgan said prior to the OPEC meeting early December, that if OPEC didn’t really cut by more than around 1.2 million barrels per day (mbpd), and they did just for the first half, (not) for the full year, that we could gravitate toward ... our low-oil-price scenario, which is $55 Brent for 2019,” J.P. Morgan’s head of Asia Pacific oil and gas Scott Darling told CNBC.
OPEC and its allies, including Russia, agreed on Dec. 7 to cut their total output by 1.2 mbpd for six months starting from Jan. 1 in order to bring balance to the global oil market and support prices.
However, with rising U.S. shale oil production and oversupply in the global market, prices temporarily rose but later plummeted further.
The price of international benchmark Brent crude rose to $63.73 per barrel on Dec. 7, while American benchmark West Texas Intermediate climbed to $54.22 a barrel after OPEC's decision on Dec. 7.
Since then, however, Brent crude fell 15 percent to reach $53.95 a barrel on Jan. 3, and WTI declined 16 percent to $45.38 per barrel.
Darling said geopolitical risks in major oil producing countries such as Venezuela, along with unscheduled refinery maintenance could help bolster crude oil prices.
"It only takes a few of these events and you suddenly get more support for the oil price," Darling said.
“In some parts of the world, you’ve still got aging oil infrastructure, which leads to unplanned maintenance," he added.
J.P. Morgan announced on Nov. 22 that it lowered its Brent price forecast for 2019 to $73 a barrel, from its previous estimate of $83.50 a barrel.
By Ovunc Kutlu