Global consultancy BMI Research has revised up its Brent oil price outlook to $75 per barrel for 2018 and $80 per barrel for 2019 from its previous estimate of $73.0/bbl and $78.0/bbl, respectively.
The revision is driven by supply side following the impact of the US’ decision to re-impose secondary sanctions on Iran, renewed global supply outages and shrinking spare capacity.
However, the decision by OPEC+ to start returning cut barrels to the market and new headwinds for demand have prevented a larger hike in the forecast, it noted.
"Over 2019, demand growth will outstrip supply and commercial crude inventories will draw, leaving the market heavily exposed to shocks on the supply side," the consultancy added.
While Saudi Arabia has sufficient capacity to balance the market, BMI reiterated that the Kingdom is unlikely to bring this fully into play, given the global, strategic importance of its supply buffers.
Meanwhile, the report said that demand momentum remains "strong and relatively broad-based across both developing markets and emerging markets", in line with its bullish expectations for 2018.
"However, demand-side risks are rising, due to the mix of rising oil prices, wide-ranging subsidy reforms and more challenging conditions in the global economy. In the short term, Brent may struggle for direction, as US policy on Iran continues to muddy the waters," it added.
OPEC on Wednesday had said world oil demand is forecast to decline in 2019, as growth in consumption rate will slow down and as rivals will pump more crude.
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