Crude oil prices could jump to US$60 a barrel by this year’s end thanks to growing demand and lower OPEC supply, according to Citigroup’s senior energy analyst Eric Lee, as quoted by Barron’s.
Lee believes that global crude oil demand will reach 97.3 million bpd, up from an average of 96 million bpd last year. At the same time, he sees OPEC producing an average of 700,000 bpd less than its average for 2016 throughout the current year.
Authorities such as the IEA and the EIA in the US also forecast a rise in oil demand this year. The IEA believes it will grow by an average 1.3 million bpd, accelerating from the 900,000 bpd in the first quarter. However, the IEA also saw global oil demand at 97.89 million bpd at the end of 2016—a figure that’s half a million barrels higher than Lee’s forecast for 2017 and bound to increase this year. Production, the IEA estimated, was lagging behind demand at 96.69 million bpd in May.
The EIA, in its latest Short-Term Energy Outlook, also forecast a gap between supply and demand that favors higher prices. According to the authority, total global production this year will be 98.3 million bpd, while consumption would be a bit higher, at 98.46 million barrels. Related: Qatar Spat Worsens As Saudi-Led Arab States Vow New Measures
These reports suggest at least partial consensus that global oil demand is growing faster than production – a trend helped by OPEC and its partners, according to Lee, despite growing pessimism about the effectiveness of the deal.
The energy analyst noted, however, that expectations were too high. OPEC and its partners agreed to start cutting production at the beginning of 2017 and in the last two months of 2016 they could boost their production as much as they liked. We recall that OPEC, Russia, and the rest of the participants in the deal took as basis for the cuts the month of October, however, so any further ramp-up in the last two months of 2016 would have only made it harder to comply with the deal, as has been evident in, say, the case of Iraq.
By Irina Slav for Oilprice.com
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