September 13, 2019 / 4:27 PM / 3 months ago

Barclays cuts oil price outlook on bearish macroeconomic factors

(Reuters) - Barclays on Friday lowered its oil price forecasts, citing the festering U.S.-China trade war, continued weakness in global manufacturing activity and increased likelihood of a disorderly Brexit.

The investment bank forecasts Brent prices to average $65 per barrel in 2019 and 2020, down from the previous $69 per barrel estimate. WTI is seen averaging $58 in 2019 and $60 in 2020, compared with earlier forecasts of $61 and $62.

“Oil prices remain in the shadows of the bearish global macro backdrop,” the British bank said, adding the trade tensions and manufacturing slowdown continue to weigh on demand.

The bank lowered its oil demand growth forecast by 200,000 barrels per day (bpd) for both this year and the next to 800,000 bpd and 1.3 million bpd, respectively.

Barclays said that while oil prices have been caught in the crossfire amid escalating trade tensions, supply-demand fundamentals have been quite supportive.

The bank sees U.S. oil production growth slowing significantly as lower commodity prices are expected to weigh on capital spending, especially from smaller operators, with continued focus on capital discipline.

“The market is likely overestimating U.S. shale growth at current price levels ... as the smaller operators, which contribute roughly 40% to the total U.S. output are finding it difficult to grow in the current price environment,” Barclays said.

Last month, two long-awaited pipelines out of the busiest U.S. shale patch started shipping oil to Gulf Coast export hubs.

Reporting by Sumita Layek in Bengaluru; Editing by Matthew Lewis

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