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Global Risk releases quarterly oil market outlook

Iran sanctions the 'main potential driver' in Q4, says hedging specialist.



Walking a tightrope: Hedging specialist Global Risk Management suggests the supply-demand balance could shift during the fourth quarter and that "[the] risk of oil price fluctuations is imminent". Image credit: Casey Horner / Unsplash


Updated on 08 Oct 2018 13:38 GMT

A/S Global Risk Management has published its Quarterly Oil Market Outlook, which looks at the key factors that are set to affect oil prices over the next three months.

In the report, Global Risk notes that the main potential driver of oil prices is the reimposing of sanctions by the US against Iran on November 4, which has already caused heavy oil price fluctuations over the last couple of months.

"Iran is one of the largest oil producers in the world and taking the country's oil exports off the market would call for increased supply by other oil producers if oil prices should remain unaffected. Hence, market focus is on news and numbers from oil producers to grasp if they will be able to offset the missing Iranian barrels, " Global Risk notes.

The Danish firm points out that a side-effect of recent higher prices could be limited economic growth especially in emerging markets.

The hedging specialist suggests the supply-demand balance could shift during the quarter and that "[the] risk of oil price fluctuations is imminent and a general uptrend seems in place, at least with the current outlook".

In a summary of market fundamentals, Global Risk says: "The U.S. sanctions on Iranian crude oil could shift supply and demand balance during Q4. The key dynamic in this conundrum is how many barrels less the world will consume of Iranian crude, and is the rest of OPEC mainly Saudi Arabia and non-OPEC member Russia going to and able to offset it?"

Discussing financials, Global Risk notes: "The trade war is a hot potato and has been for most of the year. Q3 was no different as the trade war escalated. Fears in the market are that this will hamper global growth and spill over to the oil market. So far there is no sign of a slowing global growth in terms of GDP, but looking internally into the U.S. and China, retail figures allegedly point to some goods becoming more expensive. However, another potential danger is luring which is the emerging markets' exchange rates to the USD. Many of these have weakened - making oil more expensive to buyers in emerging markets. Global demand for oil does, however, not currently seem to be remarkably affected by the exchange rates and prices, therefore financials are set to neutral."

On the issue of geopolitical factors, Global Risk states: During Q3 the sanctions against Iran have increased the global geopolitical risk premium and most countries are complying in larger or smaller degree to the sanctions, some more rapidly than others. At the moment it seems likely compliance is going to be fairly high.

"Allegedly, the Libyan production stepped up remarkably during Q3, but even so it is too early to count on increased production from there as the situation is still fragile.

"The bearish side of the geopolitics is the trade war between China and the U.S. The war has been escalating during Q3 and it does not seem to turn around during Q4. Fears are that the trade war will slow down global growth (for more on the matter see financials), but it is likely too soon to be certain of that. Therefore, geopolitics are assessed slightly bullish."

Average price forecasts (by Global Risk Management):

Brent Crude (US$ per barrel)

Q4 2018 - 85
Q1 2019 - 87
Q2 2019 - 83
Q3 2019 - 84

3.5% Rotterdam Barges (US$ per tonne)

Q4 2018 - 472
Q1 2019 - 489
Q2 2019 - 464
Q3 2019 - 467

0.1% CIF NWE Cargoes (US$ per tonne)

Q4 2018 - 741
Q1 2019 - 756
Q2 2019 - 730
Q3 2019 - 738

380 cSt Singapore Cargoes (US$ per tonne)

Q4 2018 - 500
Q1 2019 - 511
Q2 2019 - 483
Q3 2019 - 483

0.05% Singapore Gasoil (US$ per tonne)

Q4 2018 - 589
Q1 2019 - 570
Q2 2019 - 585
Q3 2019 - 607

US Gulf HSFO (US$ per tonne)

Q4 2018 - 483
Q1 2019 - 495
Q2 2019 - 470
Q3 2019 - 476

N2 Heating Oil (US$ per tonne)

Q4 2018 - 741
Q1 2019 - 756
Q2 2019 - 730
Q3 2019 - 738

To view the full report, please click here






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