A prominent international bank has slashed its forecast for oil prices amid concerns about the outlook for the global economy.
UBS expects the Brent crude price to fall to around $55 per barrel over the next six months as growing trade tensions weigh on growth.
Read more: Oil price warning bodes ill for North Sea
Brent fetched $60/bbl yesterday. UBS previously expected the benchmark crude price to remain at or above that level over a 12-month timeframe.
The bank cut its forecast after deciding growth in demand for oil is likely to be significantly lower than expected.
It noted: “If trade tensions escalate further, oil demand growth may soften even more, requiring much lower prices.”
The forecast may spark unease in the North Sea oil and gas industry as firms work to overcome the legacy of the plunge in oil prices from 2014.
This triggered a deep downturn in the North Sea.
Read more: Sale of oil services business credited with saving around 90 jobs
Sentiment improved slowly after curbs on output agreed by OPEC members and backed by other leading producers supported a partial recovery in the oil price.
UBS noted: “Unexpected supply disruptions in the Middle East or a surprise production cut by OPEC and its allies may push oil prices higher than in our new base case.”
The bank said it did not expect OPEC members and allies to announce more production cuts in the near term.
Energy consultancy Rystad said the market could come under big pressure if the global economy slows sharply and oil demand remains below trend.“If the stars fail to align … OPEC may need to discuss much deeper cuts to support the market,” said head of oil market research Bjørnar Tonhaugen.
The Brent crude price fell from $115/bbl in June 2015 to less than $30/bbl early in 2016.
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