JP Morgan Sees ‘Low Price Scenario’ for Oil

If OPEC does not follow through with its commitment to reduce oil production throughout this year, Brent crude prices could struggle to rise, according to J.P. Morgan’s head of Asia Pacific oil and gas.
In an early December meeting, OPEC and non-OPEC countries agreed to take about 1.2 million barrels a day off the oil market — initially for six months — starting January, amid a persistent imbalance between global oil supply and demand.
“Well, J.P. Morgan said prior to the OPEC meeting in early December that if OPEC did not really cut by more than around 1.2 million barrels per day, 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,” Scott Darling told CNBC on Wednesday.
On Wednesday, Brent traded down around 1% at $53.28.
Darling said factors that could keep oil prices weak in 2019 include sluggish demand and the uncertainty over full compliance from OPEC members, including the largest producer Saudi Arabia, over the agreed 1.2 million barrels per day supply reduction.
In recent months, the Saudis increased production by more than 1 million barrels per day. Now, the kingdom will aim to cut about 900,000 barrels per day in just two months. With oil prices struggling, some have said the kingdom needs Brent crude to rise significantly to balance its budget.
Last year, oil prices suffered their worst annual loss since 2015 — Brent fell around nearly 20% while US crude suffered a roughly 25% decline as stock market volatility, geopolitics and softening demand predictions roiled the energy market.