Mustafa Ansari, senior economist at APICORP, explained that until the market starts showing signs of stock drawdowns, oil prices will continue to experience pressure. Namely, the oil price will recover some of its losses and will range between the US$60-70 per barrel range towards the second half of 2019.

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The stability in oil market was disturbed in May 2018 after the US withdrew from the Joint Comprehensive Plan of Action (JCPOA) re-imposing sanctions on Iran. This led to increased uncertainty in the market, while there was also the continuing decline in Venezuela’s production and output losses in Libya and Canada.

To avoid prices from rising significantly, OPEC decided to injecting more supply into the market. The first increase in output took place in May 2018, which saw the core GCC and Russia output increase by 0.7 mb/d in the months of May and June, APICORP notes.

The initial response was positive, but then the market entered into a declining phase, supported by liquidation of long positions by hedge funds and financial investors.

However, while OPEC will reduce its output in 2019 to balance the market, US production will maintain its increasing trend.