Darkening economic outlook threatens to cap oil price in 2019

Analysts estimated the outlook for global oil demand was mixed, growing by anywhere from 1.1 to 1.5 million barrels per day in 2019. (Shutterstock)
Updated 01 March 2019
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Darkening economic outlook threatens to cap oil price in 2019

  • A survey of 36 economists and analysts forecast Brent crude oil futures to average $66.44 a barrel in 2019
  • Prices could rally gradually over the course of the year, if OPEC and their partners such as Russia agree to more production cuts in April

BENGALURU: Oil analysts have grown more pessimistic over prospects of a significant price rally this year, as booming US shale output and a deteriorating global economic backdrop threaten to offset the boost from OPEC’s crude supply cuts.
A Reuters survey of 36 economists and analysts on Thursday forecast Brent crude oil futures to average $66.44 a barrel in 2019, slightly below the $67.32 projected in January’s poll. That also compares with the $62 average for the global benchmark this year.
This is the fourth straight month in which analysts have cut their oil price forecasts. Prices could rally gradually over the course of the year, if OPEC and their partners such as Russia agree to more production cuts in April, and if US sanctions on Iran and Venezuela lead to tightening global crude supply.
But the chances of a bigger price increase seemed remote, analysts said. “In the short-term, oil markets are going to be characterized by supply tightness on international markets thanks to the OPEC cuts and US sanctions on PDVSA,” Edward Bell of Emirates NBD bank said.
“Over the rest of 2019, though, the rising oil price sits incongruously with slowing economic growth in major markets.”
Major producers, led by OPEC, will meet on April 17-18 in Vienna to review their supply cuts, which were agreed in December to help avoid a build-up in global inventory that threatened to undermine the oil price. “There is no other choice than strict compliance, otherwise the oil market will remain oversupplied. Saudi Arabia is committed to achieve market rebalancing via steeper production cuts,” said Carsten Fritsch, senior commodity analyst at Commerzbank.
A monitoring committee for the OPEC and non-OPEC oil supply reduction deal found compliance with the cuts at 83 percent in January, delegates from the group told Reuters on Feb. 20.
While sanctions on Iran and Venezuela will tighten overall supply, “both countries have reduced their production and export levels sharply during 2018, which makes us think that potential further declines will not be as sharp and the impact on oil markets will not be as important as it was last year,” said Adrià Morron Salmeron, economist at CaixaBank Research.
Meanwhile, analysts estimated the outlook for global oil demand was mixed, growing by anywhere from 1.1 to 1.5 million barrels per day (mbpd) in 2019. This was broadly in line with the 1.1-1.7 mbpd range in last month’s survey and compares with the International Energy Agency’s forecast of 1.4 mbpd in demand growth this year.


German firm wins mega order to build olive oil mill in Saudi Arabia

Updated 1 min 28 sec ago
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German firm wins mega order to build olive oil mill in Saudi Arabia

  • Scope of project, located in Al-Jouf, expected to encompass 5 million olive trees
  • Saudi Arabia investing heavily in developing domestic food industry

Arab News LONDON: A German company has won an order to build a massive olive oil mill in Saudi Arabia that will be the largest in Asia.
GEA won the order from The National Agricultural Development Company (NADEC), one of the largest agricultural and food-processing companies in the Middle East.
The scope of the project, located in the region of Al-Jouf, is expected to encompass 5 million olive trees from a single farm of 3,000 hectares, GEA said in a statement on Tuesday.
“Once the construction process is completed, this facility will be largest and most modern olive oil mill in Asia,” said Rafael Cárdenas, head of the Center of Excellence for Olive Oil at GEA.
Gulf states including Saudi Arabia, the region’s largest economy, are investing heavily in developing their domestic food industries in an effort to reduce their reliance on imports and boost their food security.
The contract to build the Al-Jouf olive oil mill is the second phase of an ongoing project and will enlarge the existing olive oil plant that was built in 2016.
Al-Jouf Agriculture Development Company is the largest modern olive farm in the world.