Oil prices likely to remain bearish in 1H2019, slight rebound seen in 2H2019: OCBC Treasury Research

Global oil prices are expected to remain bearish during the first half of this year, while a slight rebound can be expected by the second half, according to the latest report from OCBC Treasury Research.

The triple threat of US-China trade tensions, the ongoing US government shutdown and the increasing possibility of a no-deal Brexit are all capping the limit on crude’s advance at the moment.

A risk-on January, fuelled by a better-than-expected US jobs report and dovish stances from global central banks, has lifted Brent and WTI 22 percent and 26 percent off their Christmas lows. The overhanging backdrop of these three threats, however, has capped any further advances on crude as these events continue to persist as massive fat-tail risks.

In addition to the fat-tail risks, markets also have to contend with the fact that the global economy is entering its late stage cycle. China is experiencing a slowdown in growth as it attempts to deleverage while notable export-oriented economies in the region, particularly South Korea and Thailand, are all reeling under soft demand worldwide.

"In 1H2019, we expect oil prices to remain subdued due to an overhang of bearish factors, including the bleak economic backdrop and the triple threat of trade tensions, US government shutdown and Brexit," the report commented

"In 2H2019, oil prices could possibly rebound as we expect clearer resolutions on the triple threats and global demand/supply dynamics to balance out," it added.