HSBC has raised its 2019 Brent oil price forecast by $1.75/b to $67/b to reflect likely near-term market tightness following the US’s withdrawal of its sanctions waivers for buyers of Iran’s oil.
The US decision to cancel its sanctions waivers for eight countries over Iran exports from this month will likely see Iranian crude export fall by at least a further 700,000-800,000 b/d, the bank estimated in an oil market note.
Iran pumped 2.57 million b/d in April, a 120,000 b/d drop from March and the lowest since December 1988, according to a survey by S&P Global Platts.
Oil prices will likely rise in response due to a “somewhat delayed response” from OPEC producers Saudi Arabia and the UAE to fill the supply gap, HSBC said.
“We think a delay in the Saudi Arabia/UAE supply response to the cut to Iran export waivers could push crude prices higher in the next 1-2 months and pose further upside risks to our Q2/Q3 forecasts,” the bank said.
Further potential output falls from Venezuela output and ongoing possible risks to supply in Libya could tighten the market further, it said.
HSBC said, however, it expected US oil production growth of 1.9 million b/d this year, supported by a strong shale sector, to keep a cap on oil prices.
“Even if we see near-term tightness in the oil market, we expect surging US volume growth to keep a cap on prices rising too hard in the second half of the year,” it said.
The bank left its longer-term Brent forecast for 2020-2021 unchanged at $70/b.
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