Goldman Sachs Group Inc, IIF, expect lower oil prices in 2019

Daily News Egypt
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A worker pours liquid oil into a barrel at the delayed coker unit of the Duna oil refinery operated by MOL Hungarian Oil and Gas Plc in Szazhalombatta, Hungary, on Tuesday, July 9, 2013. Hungary refiner Mol may take part in oil exploration in Montenegro after country calls tender in July, daily Magyar Hirlap says. Photographer: Akos Stiller/Bloomberg via Getty Images

Goldman Sachs Group Inc cut its oil price forecasts for 2019, citing a re-emerging surplus and resilient US shale production, according to Blomberg.

Global benchmark Brent crude will average $62.50 a barrel this year, analysts including Damien Courvalin said in a 6 January note, down from a previous estimate of $70.

US market West Texas Intermediate will average $55.50 a barrel, down from a prior forecast of $64.50. Societe Generale SA also lowered 2019 price outlooks by $9 a barrel in a 7 January note.

Meanwhile, the Institute of International Finance (IIF), announced in a report on Wednesday that it expects Brent oil prices to average $65 a barrel in 2019 if OPEC`s agreement is fully implemented.

“However, with US oil shale fields facing an average break-even price of around $50 a barrel, expansion of drilling in the US could lower oil prices further beyond the near term,” the IIF explained.

Furthermore, the IIF stated that expansionary fiscal policy will continue to drive non-oil growth, as fragile investment sentiment and regional tensions continue to hinder growth of the private non-oil sector. While a modest fiscal expansion is justified in the short term, consolidation efforts should resume over the medium term.

Notably, Egypt is implementing economic reforms as part of a three-year $12bn IMF loan deal signed in 2016.

The reforms have included new taxes, deep cuts to energy subsidies and the pound flotation.

Moreover, in June, Egypt raised gasoline prices by up to 50% under the IMF programme. Meanwhile, days ago, the minister of petroleum stated that Egypt will implement an automatic price indexation mechanism on 95 octane gasoline starting in April which will limit price changes to 10%, assuring that this does not mean an increase in price during the second quarter of this year.

In that term, he expects that the price may fall or rise or stabilise at its current rate.

Furthermore, Mohamed Moeit, ministry of finance, put an estimated price for the barrel in the current fiscal year (FY) at the budget at cost of $67 a barrel, based on the forecasts of international oil prices during the year, led by the IMF and the World Bank, but before the budget came into force the oil prices exceeded the $70 a barrel.

Prices remained high for the first five months of the current FY, surpassing the level of $80 a barrel a month ago, and then gradually retreating to currently trading at $59.3 a barrel as in 9 January, around 14% lower than the same time last year.

Notably, the budget of the current FY allocated EGP 89.9bn to support petroleum products.

According to previous statements by the finance minister, every dollar increase in oil barrels from the budget target costs the state an additional EGP 3 to 4bn to support petroleum products.

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