The year 2018 wrapped up with a rout in benchmark prices of WTI and Brent. The downside risk haunts despite a pledge from the OPEC countries to cut output in 2019.

Growing caution among investors is caused by fears over a slacking market when demand is weak and oversupply sticks. Crude has hit its 18-month low, with WTI and Brent prices plunging over 40 percent since reaching their 4-year highs in last October.

As of Wednesday January 2, West Texas Intermediate plunged to $45.41, while Brent $53.8.

Concern ferments that there will be a glut for global market in 2019, despite an agreement was reached among OPEC members and other major oil producers, such as Russia, to carry out their pledges for output curb.

china oil - Fears Over Glut to Subdue Oil Prices

Photo/China Daily

The deal was signed on December 7 in Vienna, capital and largest city of Austria. It stipulates a cut of 1.2 million barrels on a daily basis for the first six months of 2019. OPEC members pledged a daily cut of 800,000 barrels, while non-OPEC producing countries 400,000 barrels.

However, this is not enough to wipe out skepticism among investors that whether potential cuts would helpful enough to digest supply surplus.

Read Also: Weakening Demand and Oversupply to Dim Oil Rise in 2019

Brent crude is expected on average to be about $69 a barrel in 2019, almost 10 percent lower than the November forecast $77 a barrel, shows a poll of 13 investment banks by the WSJ.

The current estimate for West Texas Intermediate also drops, settling at about $63 a barrel compared with the November forecast of $70.

The survey came when major oil producing countries including Russia, the US and Saudi Arabia sped up production growth in 2018.

Due to an average daily increase of about 134,000 barrels since last September, the seven major US shale basins is expected to produce 8.17 million barrels per day in January, according to US Energy Information Administration.

The US has surpassed Russia and Saudi Arabia to become the world’s top oil producer, with its basins pumping about 10.88 barrels on a daily basis. After increases for 10 consecutive weeks, US oil inventories finally veer to a downside track.

The IEA estimated that 2019 will see a slow global oil demand growth of about 1.4 barrels per day, while the EIA put the estimation for increase at 1.5 million barrels per day.

It is believed that concerns are due to slowing global economic growth, with signals including equities sell-offs, trade tensions on global fronts. And such slowdown in economic growth of emerging Asian countries, especially China and India, whose oil demand combined claims about two-thirds of world’s total, will further dim global oil market.

Strong US dollar has also heaped pressure on oil market over the past months. The rising dollar and higher borrowing cost have caused major emerging markets’ shrinking demand and investors’ shying away from risky assets, crude oil and equities among them.

Analysts also worry that what would lie ahead when the pledges for output cuts expire in the second half of this year.

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