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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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Oil Prices Could Jump To $80 Next Year

offshore rig

Strong global economic growth and Saudi Arabia bringing a risk premium to oil prices could send Brent oil prices surging to $80 next year, more than 25 percent compared to current prices, according to economist Jim O’Neill, a former chairman of Goldman Sachs Asset Management.

At 11:59am EST on Monday, Brent Crude was down 0.79 percent at $63.01.

“While oil prices could be about $60 per barrel in November 2018, my guess is that they will have risen to about $80 per barrel in the meantime,” O’Neill wrote in Barron’s on Saturday.

Although the economist himself admits that predicting oil prices is a tough job at which he failed when he said in January 2015 that prices would not continue to fall, he now differs from most of the analysts who expect oil prices to be around $60 next year. O’Neill doesn’t believe that oil prices will stagnate for a year.

On the demand side, world economic growth has picked up this year “and is now probably growing at a rate of 4 percent or higher. With the exception of India and the United Kingdom, eight of the 10 largest economies are expanding at the same time,” O’Neill said.

Although many oil consuming countries try to lessen their dependence on oil, the transition won’t take place overnight, so the oil market is adjusting to stronger demand, the economist notes. Related: Reducing Bitcoin’s Carbon Footprint

Looking at the supply side, events in Saudi Arabia are suddenly adding a premium to oil prices.

“The Saudi government has been implementing radical changes, both domestically and in its foreign policy, and its reasons for doing so are not entirely clear,” O’Neill writes.

In addition, the economist argues that the Brent spot price has now moved above the five-year forward price, which suggests that a trend change may be underway.

“For my part, I’m unsure, but I wouldn’t be surprised if it happened,” O’Neill says, referring to the trend change.

By Tsvetana Paraskova for Oilprice.com

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  • John on November 27 2017 said:
    I wouldn’t be surprised if it not below 50 per barrel because of supply and demand . Shell is catching the world market slowly , they already started to supply oil to India and they supply level is going to be 4 or 5 times more than the supply now in couple of months .it is beliveved that most companies break even is just about 40 , that means even in 50 range they will be making huge profits .

    So I guess the price will stay between 40 and 50 until 2020 and the. Gradually between 30-40 because the use of low production cost and low demand .
  • THOMAS COLTRANE on November 27 2017 said:
    GO FIGURE GOLDMAN SACHS IS LONG AND CITIGROUP IS SHORT. PERSONALLY I THINK SHALE IS OVER BLOWN. IT IS GOOD TO SEE NO MORE OIL TRAIN EXPLOSIONS. OPEC HAS MOST OF THE MARKET SHARE AND IT IS GETTING TIRED OF BEING BULLIED WITH SHALE STORIES.
  • JB on November 27 2017 said:
    Last week you posted an article saying that $40 crude was going to be more likely than $60 crude...so which is it? It's almost as if no one who writes for this website actually understands what they are writing about. Could it be that these articles are titled with click-bait headlines for the simple purpose of getting advertising dollars as opposed to providing meaningful information to the reader? Nah.
  • John Brown on November 28 2017 said:
    Stories like this are such crap. If oil is at $80 a barrel its only because of collusion and corruption at all levels of the oil supply chain, as well as the financial and other industries, including the commodities markets, all colluding and conspiring to drive the price of oil up. There remains a glut of oil sloshing around the world despite Saudi Arabia cutting back production by a huge amount. Other countries have also played the game, but they cheat as always leaving Saudi Arabia to reduce even more. Of course Saudi Arabia's foreign reserves are dropping fast, and the higher the price of oil goes the more others will cheat.
    Worse for all of them the U.S. oil industry now can make a ton of money with WTI at $57, and every dollar gives them more reason to produce more. Unlike years ago new production can shoot up and get to market in 6 months, not years. So this massive corrupt manipulation driving up the price of oil will eventually doom itself. There is no reason right now or for the foreseeable future for oil to be over $40 a barrel. At $50 more production is incented to come online. So think what is happening now at $57 and if the price continues to move up to $80. Greed and collusion is the only reason oil prices are rising, and greed and collusion will create a crash in those prices sooner or later.
  • Ivan on November 28 2017 said:
    As prices have been artificially suppressed for geopolitical purposes for over 6 years now it is far more likely that the price will move up more than down in various cycles.
    I agree with and have commented in the past 6 months that a high of $75 is most probable.

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