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Banks Stay Gloomy on Oil, Shrugging Off Attacks


LONDON—Strikes on Saudi oil facilities that knocked out 5% of global supply earlier this month have done little to shift sentiment among investment banks about the prospects for oil markets.

Futures for Brent crude, the global benchmark, are expected to trade around an average of $64.31 a barrel in the fourth quarter, according to a poll of 13 major banks conducted by The Wall Street Journal. The commodity closed at $61.91 a barrel on Friday. The estimated price level is almost unchanged from last month’s forecast, and is more than 10% below projections made about a year ago.

West Texas Intermediate, the U.S. oil benchmark, is expected to average $58.24 a barrel in the coming quarter, barely changed from August’s forecast of $57.82 a barrel, the poll showed.

Oil prices have shed the roughly 15% gains they notched on Sept. 16, in the aftermath of the attacks on Saudi Arabia’s energy infrastructure. Among the factors pressuring prices are an increase in U.S. inventories, a backdrop of deepening political and economic uncertainty, and reassurances from Saudi officials that crude exports won’t be interrupted.

“The level of Saudi Arabia’s domestic inventories and production spare capacity both suggest that maintaining export levels is achievable,” said

Damien Courvalin,

head of energy research at Goldman Sachs.

The incident is likely to have “a negligible impact” on commercial inventories held by Organization for Economic Cooperation and Development nations, Mr. Courvalin said.

The Sept. 14 attacks on the facilities belonging to Saudi Arabian Oil Co., known as Aramco, raised concerns that the company’s initial public offering may be delayed.

Higher oil prices would boost valuations for Aramco and the IPO proceeds, which are seen as crucial to help the kingdom to bolster its flagging economy.

A burgeoning glut in supply has weighed on oil prices as the trade war between the U.S. and China dimmed global growth prospects and threatened oil demand.

Members of the Organization of the Petroleum Exporting Countries and its allies, including Russia, agreed in June to extend crude output cuts. Despite the absence of most of Iran’s oil exports—Tehran is dealing with U.S. sanctions—investors have worried for most of 2019 about rising supply from non-OPEC nations such as the U.S.

A few days before the attacks, Saudi energy minister

Prince Abdulaziz bin Salman

oversaw a press conference at which some OPEC members announced fresh production cuts and the cartel stressed the importance of adherence to previously agreed output curbs.

Some delegates referred to the move as an attempt to implement “hidden cuts” of up to 400,000 barrels a day.

The slowdown in global economic growth and the completion of U.S. pipelines to the Gulf of Mexico in late 2019 and early 2020 are likely to be the two biggest factors in oil markets, said

Harry Tchilinguirian,

global head of commodity markets strategy at BNP Paribas.

“The very sharp increase we’re going to have in light oil exports from the U.S.” and the emergence of the U.S. as “a super exporter” will weigh on prices, he added.

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U.S. inventory data has repeatedly surprised investors in recent months, showing lower-than-expected draw down and unseasonable builds in oil stocks.

Taken in conjunction with sagging economic data in Europe and China, analysts have pointed out the potential for oil prices to further weaken ahead of the next summit of oil exporters in December.

“By the OPEC meeting, prices need to reflect the heavy balances we’re likely to see in the first half of the year,” said Warren Patterson, head of commodities strategy at ING. “We need prices to send a signal to OPEC to make deeper cuts.

During 2020, banks expect Brent to average $61.95 a barrel, while WTI is expected to average $56.55 a barrel, the poll showed.

A crater is pictured at Saudi Arabia’s Abqaiq oil processing plant.


Photo:

fayez nureldine/Agence France-Presse/Getty Images

Write to David Hodari at David.Hodari@dowjones.com

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