The Norwegian Aker B platform on the Valhall oil field in the North Sea.EPA-EFE/HAKON MOSVOLD LARSEN

possible global economic slowdown in 2019 that will curb fuel demand could be one of the reasons that oil prices could stay lower for a longer period of time. Oil markets are also under pressure from an increase in oil supply. US crude production stood at a record 11.7 million barrels per day in late 2018, making America the world’s biggest oil producer, according to Reuters.

“It’s fascinating because if we are going to a see a slowing up of the global economy, which is quite likely, then there is very little reason that price will be shooting up too much at the moment,” Justin Urquhart Stewart, director at Seven Investment Management in London, told New Europe by phone. “On the other hand, (US President Donald J.) Trump still feels he can try and manipulate the price through Saudi so that’s the erratic wild card we have no idea what you have is going to behave. But I would suggest there’re still more countries wishing to pump out more even to get the short-term income in even if that means that it’s barely at breakeven.”

Trump said on January 2 that US pressure had kept production high among allies in the Organization of the Petroleum Exporting Countries (OPEC), Reuters reported. “People see that gasoline is way down and the reason it’s way down is because I called up some of the OPEC people,” the news agency quoted Trump as saying. “I made calls, I said you better let that oil, that gasoline flow, and they did,” Trump added.

Russian oil output, however, reportedly reached a record of more than 11 million barrels per day in 2018.

“Russia will do their best to try and make sure there is a constriction but, at the same time, they want to get as much as revenue in because their economy is still at a terrible state and they are not too different position when you look at the military with the old Communist government. They put huge amount of money into their defenses when frankly they could not afford it,” Urquhart Stewart told New Europe. “Remember, the Russian economy is less than half of the UK’s economy and so sustaining their expenditures is going to be very difficult indeed. They need that price to be high and Trump, of course, will do his best to keep it down,” the London-based expert added.

Despite opposition from Trump, the Saudi-led OPEC clinched a deal with allied oil-producing nations including Russia last month to cut oil production. The Saudi-Russian relationship is something to watch in 2019. Russian President Vladimir Putin has made clear that the political relationship with Saudi Arabia, and the other Gulf Arab states, is a key political priority for him and for Russia, Chris Weafer, a senior partner at Macro-Advisory in Moscow, told New Europe, adding that Russian oil companies will have no choice but to comply with whatever Putin agrees with Saudi Crown Prince Mohammed bin Salman.

“The days when Russia promised and then ignored the promise are gone,” he said.

Meanwhile, the global economic slowdown appears to be making investors nervous, including in oil markets. “Basically what we have to do is step back and realize that the economy is still growing at three and half percent a year. That’s good news. The bad news is the American economy will still be grow but will be peaking because it has been on a sugar rush courtesy of the President and that is not going to be sustainable so there will be a slowdown and rates won’t go up as dearly as fast as some people have been saying but they will be gently doing it,” Urquhart Stewart said.

“One of the risks there is quantitative easing is being slowly withdrawn but as any well-know heroin addict will tell you it’s easy to take the stuff, it’s very difficult to get off it. So the financial drug we have been on the past ten years is going to be increasingly difficult not just in Europe but less in America but will impact on the American economy,” he added.

Turning to Brexit, Urquhart Stewart said a hard Brexit could drive oil prices up in the UK. “What is going to do perversely a hard Brexit will give a shock to the economy so Britain is going to think very seriously in secure terms where it gets its fuel from. A hard Brexit won’t necessarily see oil prices fall. What will do is see a fall in sterling and that will translate in oil prices. Therefore, oil for the British economy will be more expensive,” Urquhart Stewart said.

“I’m afraid it’s going be the weakness of the British economy that will be illustrated, not through the stock market, but through the currency and a hard Brexit is going to be bad for the British economy and more to the point the cost of fuel because of the price of sterling will go up a bit in the UK,” he said. He reminded that the German economy is now on a downward spiral and France is facing political issues and growing protests. “So all these condors are still there. Meanwhile, the European economy has passed its peak and is now weakening. It’s still growing but if the German economy continues it’s slowing up that will ripple out across the EU as well,” Urquhart Stewart said.

It appears that the Nord Stream-2 gas pipeline from Russia to Germany will move further ahead, which should help normalize EU-Russia relations. “Nord Stream is still highly obviously controversial. The Russians will do whatever they can to continue it but it’s going to put the Germans in a difficult position with the all the increasing news of Russian involvement and infiltration going on but I suspect Germany will still want to connect it but it does mean as ever still more reliance on Russia providing the gas,” Urquhart Stewart said. “For Germany, being so dependent on fuel supplies coming out of Russia is not a healthy position to be in at the moment. If there are going to be more issues coming out about Russia’s behavior. So this is going to be a difficult situation. Nord Stream will probably come on because the Russians desperately want it.”

Kostis Geropoulos is the Energy & Russian Affairs Editor of New Europe newspaper.