The world’s largest oil trader sees the price of the Brent barrel falling almost $14 to $45 in 2018, from its current price of $58.01, according to Ian Taylor, CEO of Vitol Group.
Taylor is predicting a surge in oil production from US drillers—an event that would likely drag oil prices downward in 2018 to $45 per barrel.
Despite the general optimism in the industry regarding oil prices, Taylor sees this optimism as false hope.
“I think there’s a chance oil could fall closer to $40 than $50, because I think there’s still one more big surge coming from U.S., which will knock prices down.”
Vitol’s CEO just last week offered up his opinion that US oil production will continue to increase in 2018—its final production spike before prices dip too far and production slumps once again.
US oil production has steadily increased throughout 2017. Production in the first week of January averaged 8.946 million bpd of crude oil, but has since climbed to an average of 9.480 million bpd as of October 6, according to the EIA. The EIA is expecting US oil production to reach 9.8 million bpd in Q1 2018, according to the latest Short Term Energy Outlook, with an average of 9.92 million bpd for the whole year.
French Total SA agrees that a surge in US oil production is on the horizon due to the increased hedging that shale producers are undertaking.
“We will see another wave of investment in US shale, no doubt about it,” Patrick Pouyanne, chief executive of Total, said at the Oil & Money conference in London on Wednesday, as reported by the New York Times. US drillers are now hedging between $52 and $56 per barrel, which could incentivize drillers to keep drilling even if the price falls.
This production spike from US drillers could press downward crude oil prices to levels not seen since 2015.
US shale producers have hedged a third of 2018’s oil production at roughly $52 per barrel, according to investment bank Tudor, Pickering, Holt & Co (TPH).
“There is definitely going to be a pretty large surge in production next year,” according to TPH’s Jamaal Dardar. TPH is predicting US oil production will reach 10.2 million bpd in 2018, compared to 9.92 million bpd that the EIA is predicting.
By Julianne Geiger for Oilprice.com
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