|FOCUS1Fig.1:LatestBNPParibasoilpriceforecastsFig.2:BenchmarkcrudeoilpricesSources:Bloomberg,BNPParibas(1)relativeto05February2019Sources:Bloomberg,BNPParibas(dailyto26/04/19)COMMODITIESFOCUS|Oil29April2019KEYMESSAGESOilpriceshaverecoveredstronglyyear-to-date,withfrontmonthICEBrentfuturesupbyover30%,andweexpectthemtocontinuetoriseinthenearterm.Inourviewoilproducers,boundbythe‘DeclarationofCooperation’,runtheriskofover-tighteningthemarketinthefaceofunplannedsupplyoutagesandresilientoildemand.WethereforemaintainourdirectionalviewofanincreaseintheaveragepriceofBrentandWTIuntilQ32019,whenthesebenchmarksarelikelytostarttobecomevulnerabletoasharpriseinUSexportsoflightcrudethankstopipelineandterminalcapacityexpansion.WestillexpecttheOPEC+grouptoretainsupplymanagementinH22019andextendcooperationin2020.However,withcontinuedgrowthinUSlightoilproductionfromshalebasinsandexports,theefficacyofOPEC+supplypolicyin2020onthepriceofWTIandBrent,throughvariationsintheoutputofamainlyheavierbarrel,islikelytofall,inourview.Weexpectcontinuedmanagementtohelpkeepthemarketinarange,butthereisariskofsubstantialfluctuationsassupplypolicyadjustmentscanlagmarketconditionsduetountimelyfundamentaldata.In2019(Figure1),weseeWTIaveragingUSD63/bbl(USD+2/bbl)andBrentUSD71/bbl(USD+3/bbl).In2020,weseeWTIaveragingUSD64/bblandBrentUSD68/bbl.Economicconcernsthattriggeredawaveofde-riskingandasharpcorrectioninoilpriceslastDecember(Figure2)haveabated.US-Chinatradetalksareinprogress,withhopesrunninghighthatanaccordwillbeachieved,whichinturnislikelytoimprovepessimisticeconomicgrowthoutcomesforthisyear.Centralbankshaveswitchedtoaccommodativepolicyin2019,notablytheFederalReservewhichhassignalledrateswillstayonholdthisyear.USdollarstrengthstillpresentsaheadwindforoilandothercommodityprices,buttheBNPParibasFXteamexpectsthegreenbacktodepreciateover2019andinto2020.Theoilmarketisatpresentfirmlyfocusedonitssupplyfundamentals,whicharesupportiveforprices,ratherthanmacroeconomicrisk.Inthefaceofresilientoildemand,themark...
