The Bank of Jamaica (BOJ) indicates that the projected path for crude oil prices over the near term – December 2019 to September 2021 – has been revised downwards, relative to the last forecast.
As outlined in its Quarterly Monetary Policy Report for the period ended September 30, 2019, oil prices are projected to average US$54.43 per barrel for the next eight quarters compared to an average of US$56.17 per barrel in the previous projection.
The daily average of West Texas Intermediate crude oil prices for the September 2019 quarter declined by 5.6 per cent and 18.8 per cent, relative to the June 2019 and the September 2018 quarters, respectively.
Weakening oil demand, combined with strong supply growth in the US, has helped build global oil inventories so far in 2019 and has limited upward pressures on oil prices.
The central bank said the projected decline in crude oil prices for the December 2019 quarter is underpinned by subdued energy demand emanating from the slowdown in global growth.
As outlined in the report, the projected decline in crude oil prices mainly emanated from an escalation in trade tensions between the US and its trading partners which increased investor’s concerns about a slowdown in global economic growth, and reports of increasing crude inventories and rising crude production in the US.
Additionally, there has been an appreciation of the US dollar, which tempered investors’ appetite for US dollar denominated commodities.
The Energy Information Administration (EIA), indicates that weekly crude oil production increased to a record level of 12.6 million barrels per day (bpd) for the week ended 04 October 2019.
The surge resulted from the attack on 14 September 2019, when two major Saudi Arabian crude facilities were hit by drones.
The attacks on the Abqaiq and Khurais oil facilities halved Saudi Arabia’s crude oil production in reaction to drone attacks.
For the period up to December, however, the BOJ says the average of the quarter-over-quarter change in crude oil prices for the period has been revised to a decline of 0.3 per cent, compared with an unchanged rate previously anticipated.
And, for the December 2019 and March 2020 quarters, oil prices are projected to average US$53.54 per barrel (5.2 per cent decline for the quarter) and US$53.72 per barrel (0.3 per cent increase for the quarter), respectively, which compares to quarterly averages of US$55.80 and US$55.32 in the previous projection.