September 18, 2019 / 9:16 AM / a month ago

Commerzbank says oil rally post Saudi attack unsustainable; cuts 2020 outlook

Sept 18 (Reuters) - The oil price rally fuelled by attacks on production facilities in Saudi Arabia is not sustainable, Commerzbank said on Wednesday, while lowering its 2020 price forecasts, citing deteriorating fundamentals including slowing demand growth.

The bank lowered its Brent forecast for next year by $5 to $60 per barrel while keeping its 2019 outlook unchanged at $65. It also reduced its 2020 forecast for WTI to $57 from $62. Commerzbank forecast WTI to average $58 this year.

Oil prices had jumped nearly 15% on Monday after the attacks on Saturday, but have since given up gains, with benchmark Brent steadying near $64.55 a barrel at 0732 GMT after Saudi Arabia said it would restore its lost output by end-September.

While the attacks had “painfully demonstrated the risks to oil supply,” raising the possibility of short-term price spikes, prices should fall again in the coming weeks as long as there is no “total escalation of the situation”, analysts at the bank said in a note.

The U.S.-China trade dispute and resulting fears of a recession, a slowdown in oil demand growth and a stronger-than-expected U.S. dollar, are likely to weigh on oil prices, Commerzbank said.

“The less pronounced increase in demand, the higher non-OPEC supply and the weaker production compliance of OPEC+ excluding Saudi Arabia should result in the oil market being less tight in the second half of 2019 than initially thought.” (Reporting by Eileen Soreng in Bengaluru; editing by David Evans)

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