Senior oil analysts have shrugged off concerns about a prolonged slump in prices after Dated Brent crude briefly dipped below $65/b for the first time since March. Since early October, the benchmark grade has slumped more than 20% in value from $86/b. The downturn has raised concerns over a possible repeat of 2014 when prices crashed after supply outpaced demand and OPEC refused to adjust production for fear of surrendering market share to the US shale industry and Russia. However, oil analysts at leading banks and institutions interviewed by S&P Global Platts on Wednesday argued the downturn in prices, which gathered pace after the US granted sanction waivers for some customers of Iran’s crude, could be short-lived.
BNP Paribas’ head of commodity markets strategy Harry Tchilinguirian expects prices to “bounce back” because the waivers handed to eight buyers of Iranian crude are temporary. “The oil markets have experienced a severe correction in the past month and half, but the outlook based on fundamentals still remains supportive for a rally in oil prices as we head into next year,” Tchilinguirian said. Iran’s oil exports have dropped below 2 million b/d from around 2.7 million b/d in April and declines are likely to continue, said analysts.
“In reality, core fundamentals have not changed dramatically. What has changed, however, is that in October the market was focused on bullish tailwinds, mainly associated with geopolitical risk, while today the market is focused on bearish headwinds from rising production, weaker demand, and higher stocks,” said Chris Midgley, head of S&P Global Platts Analytics.