After major oil producers announced to extend output cuts in October, industry analysts have raised their forecasts for the crude price of the coming 2018.
Led by Russia, OPEC members and other oil export countries have kept 1.8 million barrels a day off the market since January, facilitating to skyrocket crude prices about 40 percent from the lows of the year. Except for the urge of world big oil, the market disordering in Libya, political tensions in Saudi Arabia, and Nigeria and economic recession in Venezuela that has cut crude output will also intensify the market competition and result in oil prices growth.
According to Goldman’s latest research, the anticipated Brent price of 2018 has been lifted to $62 a barrel WTI projection to $57.50 a barrel. The revisions were increased from $58 a barrel and $55 a barrel respectively. While the OPEC-led deal “leaves room for an earlier exit than currently scheduled, we now reflect this resolve in our supply forecast, with full compliance for longer and a more modest exit rate,” mentioned by Goldman in the research.
However, there’s risk beyond 2018. The upward price forecast is on the risk of the over tightening situation result from market disruption and the demand exceeding our optimistic forecast of OPEC, which facilitates the stock draw run hot.
OPEC conclude the outlook of world oil till 2040 and deemed that it would be an increase of 6.9 mb/d, rising from 95.4 mb/d to 102.3 mb/d to the medium-term oil demand during 2017-2040 which indicate the oil demand growth remains healthy. While the long-term oil demand is expected to increase by 15.8 mb/d to reach 111.1 mb/d by 2040, but the growth pace of oil demand would slow down.
When we look at the change of oil movements and trade. It is anticipated that the domestic and foreign trade development of US & Canada region would aggravate the change of world crude trade during 2017-2020.Additionally, since more regions like Latin America and Africa, Middle East are expected to consume more crude locally in newly installed refining units, which would lead to a slight drop of international oil trade in around 2025.
However, the oil market is closed related with uncertainties that stem from a wide variety of sources, including economic, political and other factors. We should always consider the risk and uncertainties before make the final conclusion.