Softer growth in demand suggests that the oil market will be in surplus by end-2019 and that prices will fall, the UK-based Capital Economics consulting company said.

"We think that the 1.2 million barrels per day (bpd) output cut by OPEC+ will bring the market close to balance in the first half of next year. But weaker growth in US demand will prompt a return to surplus later in the year," Trend reports citing the company's outlook.

At the same time, the company believes that all the signs are that US production will continue to expand rapidly.

"We expect the price of Brent crude to fall to $55 per barrel by end-2019. However, additional pipeline capacity is coming onstream in the US which should facilitate exports and start to close the spread between Brent and WTI, which we expect to narrow to just $5 per barrel, from $10 currently,"

Similarly, the company expects the price of coal to remain under downward pressure on the back of the more subdued economic activity and ongoing efforts to substitute for cleaner fuels in power generation.

"But we are more upbeat on the outlook for natural gas prices, premised on strong growth in demand. Even though US natural gas production has surged this year and is expected to grow again in 2019, it is failing to keep up with consumption growth and we expect the price of Henry Hub to average $3.7 per mBtu (million British thermal units) in 2019, up from $3 in 2018," said Capital Economics.

OPEC and non-OPEC producers reached an agreement in December 2016 to curtail oil output jointly and ease a global glut after more than two years of low prices. OPEC agreed to slash the output by 1.2 million barrels per day from January 1.

Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017.

OPEC and its partners decided to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.

The 5th OPEC and non-OPEC Ministerial Meeting was held in Vienna, Austria, on December 7, 2018.

The meeting participants decided to adjust the overall production by 1.2 million barrels per day, effective as of January 2019 for an initial period of six months. The contributions from OPEC and the voluntary contributions from non-OPEC participating countries of the 'Declaration of Cooperation' will correspond to 0.8 million barrels per day (2.5 percent), and 0.4 million barrels per day (2 percent), respectively.

Source: TREND News Agency