According to J.P Morgan’s head of Asia Pacific oil and gas, Scott Darling, if OPEC members do not continue with their production cut for the entirety of 2019 -- promised at 1.2 million barrels off the oil market per day -- then Brent crude prices could find it extremely difficult to rise again.
In an early December meeting, OPEC members and non-OPEC allies had come to an agreement that 1.2 million barrels a day would be removed from the oil market for the first six months of the new year, starting January 2019. The goal of the move is to address the growing imbalance between global supply and demand. But with oil prices suffering their worst annual loss since 2015, according to the analyst, this commitment must be followed not just for the first six months but for the entire year to support prices.
With Brent falling another ~1% on Wednesday, J.P Moran further adds that if this commitment is not followed through then oil barrel prices could come down to as low as $55 per barrel or may hit even lower levels in 2019.
This low price scenario can happen due to sluggish demand for crude and uncertainty of OPEC members to follow through their commitment of oil reduction.
But if things go according to the plan, according to JP Morgan, Brent crude prices could average at $73 a barrel in 2019.