BofA Merrill raises 2019 Brent crude price forecasts

(Reuters) - Bank of America Merrill Lynch raised its Brent crude price forecasts for next year, citing a bigger reduction in Iranian exports than its earlier projections due to a more aggressive stance by the United States.

The bank lifted its 2019 Brent price forecasts to $80 a barrel from $75. [nFWN1WA05F]

“Our previous projections only embedded Iran supply losses of 500 thousand barrels per day (bpd). We now include a 1 million barrel per day reduction,” the bank said in a research note.

“The Iran factor may dominate the market near-term and cause a spike, but EM (emerging markets) demand concerns could reappear,” it added.

Oil prices jumped more than 2 percent to a four-year high after OPEC declined to announce an immediate increase in production despite calls by U.S. President Donald Trump for action to raise global supply. [O/R]

OPEC’s leader Saudi Arabia and its biggest oil-producer ally outside the group, Russia, ruled out on Sunday any immediate, additional increase in crude output, effectively rebuffing Trump’s calls for action. [nL8N1W908R]

The New York-headquartered bank said NYMEX WTI crude CLc1 oil prices would lag Brent crude LCOc1 in the move higher as U.S. infrastructure constraints were unlikely to be resolved for another 12 months.

Iran sanctions, U.S. shale bottlenecks, and new rules on bunker fuel from 2020 to curb shipping pollution will dominate oil balances in the coming months, the bank said adding, significant demand destruction from the emerging markets could follow if Brent crude oil prices jumped above $120/bbl.

Reporting by Vijaykumar Vedala in Bengaluru, editing by Louise Heavens