KUALA LUMPUR, Jan 9 — Analysts are expecting greater volatility in oil prices throughout 2020.

Moody’s Investors Service vice-president and senior credit officer, Elena Nadtotchi said the heightened geopolitical risks in the Middle East and reduced production among oil exporting countries will support prices.

However, rising global production that outpaces demand growth at a time of cyclical economic slowdown in several large industrial countries will put prices under pressure, she said.

In December 2019, the Organisation of the Petroleum Exporting Countries-Plus group of producers called on its members to improve compliance and deliver additional cuts up to March 2020 to prop up oil prices in the oversupplied market.

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“Yet several large projects in Norway, Brazil and Guyana will boost oil supplies worldwide in 2020, and integrated producers as well as large exploration and production companies in the United States (US) will spearhead robust production there,” she noted in Moody’s “Oil and Gas-Cross Region: Commodity prices, access to capital, regulation, rank among top risks for 2020” report.

In the medium-term, the report said Brent crude price is expected to trade between US$55 (RM225) and US$75 per barrel (bbl) amid heightened volatility due to short-term supply adjustments and rising geopolitical tensions in the Middle East.

“Any future attacks on oilfields similar to the September 2019 attack in Saudi Arabia will likely cause a temporary loss of oil production, with corresponding temporary effects on oil prices,” she said.

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Affin Hwang Capital analyst Tan Jianyuan forecast Brent oil prices to move between US$60 bbl and US$65 bbl following the largely oversupplied oil market.

He pointed out that global demand is projected to improve starting from the second half of this year, with tighter supply in the final quarter of 2020 onwards.

“However, near-term global oil prices will likely ride on any development in the negotiations between the US and China and any escalation of tensions between the US and Iran,” he said to Bernama.

The recent US air strike which killed a top Iranian official sparked another round of geopolitical tensions, resulting in the Brent oil price soaring to a high of US$70 bbl on Monday.

Prices had surged on fears of escalating conflict and supply disruption in the Middle East after Iran’s Major General Qassem Soleimani was killed in a US drone strike at the Baghdad airport.

On Wednesday, Brent crude futures rose to a four-month high of US$71.75 bbl following Iran’s move to fire missiles at two US military base in Iraq in retaliation for the US attack.

However, prices fell to US$65.22 bbl later in the day after the US President Donald Trump said that Iran “appeared to be standing down” in the Middle East.

Brent crude is now hovering at US$65.22 bbl.

“The explosive moves in oil prices over the past few days highlight just how sensitive the commodity is to geopolitical shocks.

“It will be interesting to see how far geopolitical shocks support oil prices before investors re-direct their focus back towards the US-China trade and global growth,” said FXTM senior research analyst Lukman Otunuga. — Bernama