JOHANNESBURG - Economists expect the Brent crude oil price to average between $72 (R963) and $80 per barrel for the remainder of the year, due to geopolitical risk factors. 

NKC African Economics economist Gerrit van Rooyen said yesterday that the Brent crude oil price looks set to average $80 per barrel in the remainder of this year as the spectre of oil shortages looms large amid possible supply threats. 

Van Rooyen yesterday said that despite Opec’s recent pledge to raise production by 1 million barrels per day, oil consumers were anxious about future shortages due to several countries facing significant supply threats. 

“We remain sceptical that the Tripoli-based National Oil Corporation, which has lost control over key oil ports to militia who are backing a rival national oil company, will be able to double its output as intended. “Iran is also heading into a crucial period, with US sanctions to take effect from mid-November. We expect a sharp drop in output as many countries will be pressured to cut purchases of Iranian crude,” said Van Rooyen. 

Iran is the world’s fifth-largest producer of oil. Van Rooyen said that global supply was expected to grow this year. While demand growth was likely to remain strong, the possibility of a full-blown global trade war was a key downside risk, he said. 

“We expect the Brent crude oil price will average $80 for (the second half of this year) and $77 for 2019,” Van Rooyen added. 

Lukman Otunuga, a research analyst at forex broker FXTM, said yesterday that geopolitical risk factors could play a significant role in where oil concluded this year. 

“Falling production from Libya, Venezuela and Canada, coupled with looming sanctions on Iran, have provided a solid argument for oil to remain at such elevated levels,” said Otunuga. 

He said that with growing concerns of supply disruptions boosting investor attraction towards the commodity, prices were likely to remain buoyed in the near-term. 

However, there was speculation that Saudi Arabia, which has about 18 percent of the world’s proven petroleum reserves, would tap into its spare capacity of 2 million barrels per day to add more oil to the markets, while US shale production also remained robust. 

“This could be volatile and rocky in the second half of the trading year as investors juggle with the themes driving prices. “In regard to the year-end outlook, this depends on how global trade developments play out and if rising production from Russia and Saudi Arabia is able to replace the production lost from geopolitics,” said Otunuga. 

He said the threat of a global trade war negatively impacting demand for commodities remained a significant risk to oil prices this year. 

Otunuga said it was too early to make any predictions about oil for next year, given the growing uncertainty and various fundamental themes driving prices. 

Momentum economist Sanisha Packirisamy said yesterday that for her inflation model, her forecasts were an average of $72.2 per barrel for this year, $72.5 per barrel for next and $75 per barrel for 2020. 

Barclays plc this week raised its outlook for Brent crude oil prices for this year from $70 per barrel to $73 per barrel. 

On the other hand, the British bank raised the Brent crude oil price outlook for next year from $65 per barrel to $71 a barrel. Barclays attributed the change in forecasts to expectations of lower supply from Libya and Iran.

-BUSINESS REPORT