The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, are sporting an average fourth-quarter loss of about 24%, but some analysts are forecasting upside for oil in 2019.
Oil recently got a boost after lengthy Organization of the Petroleum Exporting Countries (OPEC) discussions finally came to a conclusion, resulting in a larger-than-expected production cut that sent prices higher.
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OPEC and associated partners agreed to cut 1.2 million barrels per day with OPEC being responsible for 800,000 barrels. The latest production cut came as a surprise to many oil analysts as initial estimates were slated at 1 million barrels per day and 650,000 barrels per day for OPEC.
“Despite dramatic slides in the oil market, some forecasters remain positive on prices and demand going into 2019,” reports CNBC. “A year ahead outlook report from Bank of America Merrill Lynch expects Brent crude to regain its recent losses in 2019 and settle at $70 a barrel. But amid mounting global uncertainty on everything from trade and monetary policy to politics, that forecast is far from consensus.”
Production Outlook
While many market observers typically look to OPEC for clues regarding production forecasts, increasingly OPEC member Saudi Arabia, the U.S. and Russia are dominating the global oil output conversation. The U.S. and Russia are not OPEC members, but the countries are two of the world’s largest oil producers. The U.S. recently became a net oil exporter for the first time in 75 years and Russia is pumping at post-Soviet era records.
“In addition to American shale producers firing on all cylinders, the impact of higher inventories in countries like Iraq and Brazil on market fundamentals is something the Saudi-Russia cut may not be able to fully counter,” according to CNBC.
Oil prices have previously hit multi-year highs in mid-2018 after President Donald Trump withdrew from the Iran nuclear deal, which reinstated sanctions against the Middle Eastern country’s crude exports. Iran’s oil shipments have since declined by over a third and analysts expect more than a million barrels per day could be cut off from the market by the first quarter of 2019.
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