Baku, Azerbaijan, Sep.6
By Leman Zeynalova – Trend:
The forecasts for Brent oil have been revised down from $67 per barrel to $64 per barrel for 2019, Trend reports with reference to Fitch Solutions Macro Research (a unit of Fitch Group).
“We have also adjusted the price levels for our medium-term forecasts, although the y-o-y growth rates are broadly the same,” said the company.
Fitch Solutions said that the downward adjustment reflects a looser picture on the demand side.
“Oil prices faced renewed weakness in August, as trade relations between the US
and China continued to deteriorate sharply. On August 1, US President Donald Trump announced plans to impose a 10 percent tariff on the remaining $30 billion of Chinese imports into the US. This sparked retaliation by Beijing, which imposed additional tariffs on $75 billion of US goods, including a 5 percent tariff on crude (although the impact of this will be negligible). This in turn provoked President Trump, who tweeted that the 25 percent tariff already in place on $250 billion of imports from China would be raised to 30 percent, effective October 1, while the new 10 percent tariff would be increased to 15 percent. $112 billion of goods became subject to this 15 percent tariff on September 1,” reads the report.
The company believes that this new escalation in tensions threatens further damage to global trade and economic growth and, consequently, the demand for oil.
“The trade war has already inflicted significant damage on Brent, feeding bearish sentiment in the market. Further weakness in the underlying fundamentals will only fuel this bearishness further. Over H119, the impact on oil demand from the slowdown in trade became clear, with growth dipping into negative territory in some months. Industrial fuels, such as diesel, were badly impacted, while the weakness in growth was most pronounced in more export-dependent economies.
Given the worsening outlook on trade relations between the US and China, this dynamic is unlikely to revers e anytime soon,” said the report.
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