KUALA LUMPUR: More leading global banks are now following Goldman Sach's footstep to revise downwards the average Brent crude oil price forecast to US$60-US$65 a barrel for 2019.
This has pushed the consensus target down to US$70 a barrel for this year from US$72 previously.
The forecasters are basing this on an additional key factor, the United States’ sanction against Iran, which is expiring in May and another major uncertainty in the oil industry.
The industry was facing uncertainties due to the ongoing trade war between China and United States, they said.
There was strong fear in the market that demand for oil may continue to be lacklustre moving forward, they added.
A local economist believes a budget recalibration was imminent for Malaysia if the Brent crude kept trading at around US$60 per barrel for the rest of the year, which will lead the price average for the year to hit the forecast level.
This is despite Finance Ministry's recent statement that the government would only recalibrate the budget once the oil price averages US$50 per barrel.
The Brent price average year-to-date currently stands at around US$57 a barrel.
The banks that haved cut their oil price forecasts recently included CMB International Capital Corp Ltd, Dubai-based Emirates NBD, French multinational investment bank Societe Generale Bank of Tokyo-Mitshubishi UFJ Ltd and Spanish multinational Banco Santander.
CMB International, a wholly-owned subsidiary of China Merchants Bank, said the sanction against Iran would still play an important role on oil price, as the US’ decision to relax or tighten sanctions through extending the waivers or not would have material impact to global oil supply.
“We believe the uncertainties from sanction waivers are still high,” said the investment bank which forecast the Brent to trade at US$60-US$65 a barrel on average for 2019.”
The bank added that the oil market was following US-China trade negotiation progress closely, as leading economic indicators had exhibited weakening signal, which will likely to drag global oil demand if trade war continues.
Putra Business School manager of business development Associate Professor Dr Ahmed Razman Abdul Latiff believes the Malaysian government may have to recalibrate the 2019 Budget if the oil price continued to average at US$60 a barrel.
“The budget was based oil revenue set at US$70 a barrel so if price remains at US$60 the government has to calibrate its budget sooner than if price averages at US$50, probably by delaying some of the proposed expenditures,” he told NST Business.