LONDON: Bank of America Merrill Lynch has retained its forecast that oil will average at $70 this year, after prices rebounded from a two-year low in December.

Despite recent market volatility and economic jitters, the bank sees oil demand growth remaining roughly unchanged at 1.2 million barrels a day in 2019, according to its Global Energy Weekly report.

“Despite bearish investor positioning, Brent has bounced back above $60 a barrel and we retain our $70 a barrel forecast for 2019,” the bank said.

“As we revisit our balances in the light of the recent volatility, we adjust demand for lower growth but do not embed a much feared recession into our forecasts.”

A output-cut deal between OPEC and other producers from outside the group led by Russia — together known as OPEC+ — is likely to see a drop in output by 1.6 million barrels a day, the bank said.

“We see a major rebalancing with Saudi (Arabia) and UAE likely reducing output by 1.2 million barrels a day from November levels … Other members of the Declaration of Cooperation (DoC) should help too,” it said.

The steep fall in oil prices in the last quarter of 2018 was partly due to a reversal of the inventory declines observed during the first half of the year, the bank noted.

Despite the relatively upbeat forecast for oil prices this year, Bank of America Merrill Lynch warned about the sensitivity of the market to changes in global GDP growth.

The price of Brent crude could drop to $35 a barrel if global GDP slows down from 3.5 percent to 2.0 percent, the bank said.

The bank’s forecast of oil at $70 marks the upper limit of prices predicted by Oman’s oil minister. Mohammed Al-Rumhi told Bloomberg TV that the OPEC+ agreement can sustain prices at $60 a barrel, and that he sees crude trading between that bottom and $70 this year.