A faltering global economy may start eating into demand for oil as early as this year, pushing prices lower, Fitch Ratings’ senior director Dmitry Marinchenko told Reuters in an interview.
He said that the rating agency expects global economic growth to slow to 2.8 percent in 2019-2020 from 3.2 percent in 2018.
“If the global growth slowdown becomes more pronounced, or even if recession materialises, then demand for oil could fall sharply, which is the main risk for global oil prices.” he said.
Fitch Ratings sees 2019 oil prices averaging around $65 per barrel, falling to $62.50 in 2020 and $57.50 by 2022.
The price of Brent crude is currently testing $70 per barrel, its highest this year, following cooperation between the Organization of the Petroleum Exporting Countries and other large oil producers led by Russia to cut supply.
US sanctions against Iran and political and economic turmoil in Venezuela have also capped output.
The OPEC-led group agreed to cut their combined oil production by 1.2 million barrels per day for six months starting from January 1.
The next OPEC and non-OPEC meeting is expected to be held in June to discuss an extension of the supply cuts.
Marinchenko said the future of the deal would likely hinge on the situation in Venezuela and Iran. He said it was possible the size of the cuts could be adjusted.
“Oil production in Venezuela will continue to decline, the quotas will have to be revised.”
Marinchenko said Fitch does not expect to change the credit rating of Azerbaijan’s energy company SOCAR from BB+ in the next two years.
The rating is in line with Azerbaijan’s sovereign rating, on which Fitch is due to give an update in July.
Marinchenko said Fitch expects Azerbaijan’s oil production to rise by 2020 thanks to a boost in gas condensate output at the large Shah Deniz field.