Oil to Rise as Sanctions Outweigh Demand Risks

Oil prices are likely to climb continuously into next year, as concerns over drops in supply from the likes of Iran and Venezuela outweigh any worry that global trade disputes could undermine demand, a Reuter's poll showed on Friday.

A survey of 50 economists and analysts forecast Brent crude to average $73.48 a barrel in 2018, up from the $72.71 forecast in August and the $72.68 average so far this year. Brent was forecast to average $73.75 in 2019, CNBC reported.

This is the highest projection for the benchmark for both 2018 and 2019 in the polls this year.

“Concerns over global trade disputes have not yet really affected economic growth, but the sanctions on Iran already have had an impact on Iranian exports and output,” said Frank Schallenberger, head of commodity research at commercial banking company LBBW.

“If an export destination like South Korea is not willing to buy Iranian oil anymore, there is a high probability that output from Iran could drop some 500,000-1 million bpd. This is really bad news for the supply side - and especially also for the consumers - as prices could go up even further,” he added.

Iranian exports of crude and condensates have declined by 0.8 million barrels a day from April to September, according to the Institute of International Finance, ahead of the Nov. 4 US sanctions on the third largest producer in the Organization of the Petroleum Exporting Countries.

Brent prices have risen more than 20% since the beginning of April.

Analysts expect a reduction of anywhere between 500,000 and 1.5 million bpd in Iranian supply due to the sanctions, with most expecting Saudi Arabia to take the lead in filling any supply gaps.

However, an escalating trade dispute between the US and China, the world’s largest consumer of commodities, could affect demand growth, especially next year, analysts said.

Global crude oil benchmark Brent was up 20 cents at $81.92 a barrel. US crude was 20 cents higher at $72.32 a barrel. It is up around 3.5% this month, but down 2.6% since the end of June.