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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Analysts Expect Oil Prices To Rise This Year

Offshore platform in the distance

Analysts polled by Reuters expect higher oil prices this year, confident that OPEC and Russian cuts will offset growing U.S. production. Brent crude, analysts expect, will now average US$63 a barrel, versus US$62.37 projected in an earlier poll conducted in January.

One of the analysts polled noted that volatility will also increase as everyone keeps a close eye on U.S. production, which the EIA said it expected to pass the 11-million-bpd threshold by next year.

Caitlin Birch from the Economist Intelligence Unit told Reuters, “That its [the U.S.] oil market is dominated by a large number of uncoordinated, private-sector firms, many of whom benefit from lower production costs than producers elsewhere, means the U.S. will remain a major player for the foreseeable future.”

Earlier this week, the UAE’s Energy Minister Suhail Al Mazrouei told Bloomberg that OPEC and Russia had exceeded market expectations with their oil production cuts. He’s right, of course, as the market did not expect the cartel and its partners to stick to their 2016 deal based on historical evidence.

Yet Al Mazrouei also said he expected the adherence to the production cuts to continue this year, causing the oversupply to disappear later this year. This is the opposite of what the OPEC pack leader, Saudi Arabia, expects. In comments made last weekend, Khalid al-Falih said he expected the oil inventory overhang to persist until 2019. Related: Crucial U.S. Pipeline In Legal Limbo

Despite the steadfast compliance by the largest producers, doubts linger as to whether the deal will survive until its December 2018 deadline. “The supply deal remains a key uncertainty for the oil market. A transition of the deal is needed but not yet visible, with both an over-tightening and an orderly unwinding being potential scenarios,” Julius Baer’s head of commodity research, Norbert Rucker, told Reuters.

Other analysts are being more cautious, ready for both a fall and a rise in prices. Saxo Bank’s Ole Hansen, for example, expects Brent to stay range-bound between US$55 and US$70 a barrel. Too high prices, Hansen said, will dampen demand, while too low would hamper production growth in the United States.

By Irina Slav for Oilprice.com

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  • John Brown on February 28 2018 said:
    You got to love it. There is a huge amount of production capacity, with millions of BPD sitting idle to prop up prices, and still there is a glut of oil on the market. The USA via oil shale is busting through all forecast, and why not. New technologies continue to drop production cost, and the speed with to market which is now months rather than years. With WTI over $60, and OPEC/Russia and the rest of the industry working to prop it up at $65 or over their are tens of billions of dollars to be made by the U.S. With so many analyst predicting that OPEC/Russia will continue to cut back production to keep the price high no matter what the USA produces now is the time for a U.S. oil Gold Rush. The U.S. will likely hit 11 Million BPD by mid 2018, and 13 Million by the end of 2019, possibly more. These higher prices also give renewables a breathing space to continue dropping their cost while increasing their market share. Now is the time for the USA to get that shale oil and gas out of the ground and make a ton of money.
  • Mamdouh G Salameh on February 28 2018 said:
    Based on global oil market positive fundamentals and the fact that the oil market is virtually re-balanced, I am going to stick my neck out and project that oil prices are going to go beyond $70 a barrel and could probably reach even $75 in 2018.

    Furthermore, the OPEC/non-OPEC production cut agreement not only will survive 2018 but will go beyond it in a format that will reflect changing conditions in the global oil market. Cooperation between OPEC and Russia will be enshrined in a new pact which could go well into the future. I go as far to say that we could see the emergence of a “Super OPEC” with Russia a member in all but name.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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