November 2, 2018 / 12:13 PM / 16 days ago

No bull territory: Trading houses see lower oil prices in 2019

LONDON (Reuters) - Oil prices won’t rally and may fall further in 2019 as a slowing global economy and booming U.S. output help offset the loss of Iranian barrels, the world’s biggest oil traders told the Reuters Global Commodities Summit.

FILE PHOTO: A drilling rig is parked up in the Cromarty Firth near Nigg, Scotland, Britain January 27, 2015. REUTERS/Russell Cheyne/File Photo

Oil prices briefly spiked in early October to a four-year high above $85 per barrel buoyed by concerns about whether the market would be able to handle U.S. sanctions on Iranian oil that kick in next week.

Estimates on how much Iran will be able to export vary wildly and even its current export levels have become increasingly opaque.

Key Iranian oil importers, mainly in Asia, have requested waivers from the sanctions. Bloomberg reported on Friday that waivers had been granted to eight countries, citing a U.S. official.

Washington has not yet made any official announcements.

The big five oil trading firms and staunch rivals - Vitol, Gunvor, Mercuria, Glencore and Trafigura meet over 10 percent of the world’s daily oil demand of over 98 million barrels per day.

“Crude markets are not that tight in the immediate term ... and a fair price of oil going into next year is probably closer to the $70 or $65 per barrel mark than the $85-$90 area that some people are talking about,” said Vitol’s Chief executive Russell Hardy.

Chief executive of rival Gunvor, Torbjorn Tornqvist, said oil prices will likely stay near current levels of $75 per barrel next year as most producers reckon that higher prices would destroy demand and create a new glut.

“Except for a few nations which are perhaps less important than Russia and Saudi Arabia volume-wise, I don’t see anybody wanting $85 oil,” Tornqvist said.

GRAPHIC: Traded volumes of five biggest oil traders - tmsnrt.rs/2RzHUEr

Vitol and Gunvor said Iranian exports could still reach around 1 million bpd, higher than previously feared. Iran’s crude exports were about 2.5 million bpd in May, the same month sanctions were announced.

The International Monetary Fund revised down its global economic growth forecasts for 2018 and 2019 last month, saying that the U.S.-China trade war was taking a toll while some key emerging economies were struggling.

Vitol’s Hardy said his firm had revised 2019 oil demand growth forecast to 1.3 million bpd from the previous 1.5 million.

Tornqvist said he expected Washington to take a pragmatic approach and grant more waivers to Iranian oil buyers if prices rallied above $80 per barrel but take a more severe approach if prices softened to $60 per barrel.

GRAPHIC: Traded volumes of five biggest oil traders - tmsnrt.rs/2P3CZPe

OPEC TO THE RESCUE

Mercuria Energy Group’s chief executive Marco Dunand said he expected oil oversupply to worsen and prices to get softer compared to current levels unless OPEC intervened to curtail its own production and address the glut.

“Because of trade tensions and a number of other factors... there is plenty of risk that demand growth will not be a strong as originally anticipated,” Dunand said. “The chances are that we are going to be building oil inventories.”

“If we start moving into the low $70s on Brent, I think some producers will start asking themselves whether they haven’t overreacted,” he said.

The International Energy Agency warned this week that high oil prices were already hurting big consumers like India and Indonesia.

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Reporting By Julia Payne, Dmitry Zhdannikov, Amanda Cooper and Ahmad Ghaddar; Editing by Elaine Hardcastle

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