Hopes of the Organisation of Petroleum Exporting Countries (OPEC) ever witnessing an oil price of $100 per barrels has been dimmed by the latest forecast from the International Monetary Fund (IMF), which expects crude oil prices to drop from the projected $62.31 per barrel to $58 a barrel in 2019.
The latest projection from IMF, which further suggest an annual crude oil price of $62.3 a barrel in 2018, expects crude oil prices to drop to as low as $53.6 per barrel by 2023, despite OPEC production freeze to boost the price.
These projections were contained in the IMF’s latest World Economic Outlook released this week.
Supply outages, the extension of the production agreement by OPEC, and stronger-than-expected global economic growth all pushed oil prices higher.
Among key influences on oil prices, on November 30, 2017, OPEC agreed to extend to the end of 2018 the production target in place since January 2017.
This extension was the second (following the April 2017 agreement that had extended the November 2016 agreement).
The agreement entails a cut of 1.2 million barrels a day (mbd) relative to October 2016 production.
Russia and other non-OPEC countries agreed to stick to current production levels, implying additional cuts of about 0.6 million barrels per day relative to the October 2016 level.
Consequently, IMF stated: “Baseline assumptions for the IMF’s average petroleum spot prices, based on futures prices, suggest average annual prices of $62.3 a barrel in 2018—an increase of 18.0 percent from the 2017 average—and $58.2 a barrel in 2019.”
IMF said that the decline is due to an expected increase in US supply and the eventual end of the OPEC deal.
According to the agency, uncertainty remains around the baseline assumptions for oil prices, although risks are balanced.
“Upside risks include further declines in Venezuelan production and unplanned outages elsewhere.
“At the same time, stronger-than-expected US and Canadian production could push prices down sooner than predicted.
“However, the long end of the futures curve is expected to stay at about $55, given current technology trends”, it added.