Abu Dhabi: A number of factors will influence oil prices in 2018 including slower demand growth, surge in production from the US as well as from the Opec member countries, according to an analyst from Emirates NBD.
Oil prices are trading a bit lower in the last few days with global benchmark Brent at $62.79 (Dh230.44) per barrel, down by 3.12 per cent and West Texas Intermediate at $59.20 per barrel, down by 3.19 per cent.
“We look at big increase from the United states, on an average over million barrels per day of supply growth and the demand growth is probably going to be bit slower than last year,” said Edward Bell, a commodity analyst speaking to Gulf News.
He also expects Opec supply is going to be higher this year even if some countries are bound by the terms of the production cut agreement.
“For instance, Saudi Arabia has overcut in terms of its target as part of the deal last year. It can increase its production but still be 100 per cent compliant this year.”
Opec along with producers like Russia are cutting output by about 1.8 million barrels per day to help lower global oil inventories and support oil prices. The deal is expected to end by the end of 2018.
Bell expects compliance for the deal is going to get weakened over the course of the year and the output cut deal will be sustained till the of the year.
On oil price outlook, he said in 2018, Brent is going to be roughly $60 per barrel on average and the prices are going to be lower towards the end of the year trading close to $55 on average.
“In the very short term there will be increased level of volatility from where it has been previously.”
Ole Hansen, head of commodity strategy at Saxo Bank also said on Sunday that the Opec group’s so far successful attempt to curb global production in order to support the price has become unstuck and response from non-Opec producers have caught the market by surprise.
“While supporting a strong recovery in global crude oil prices since last June, Saudi Arabia and its Opec friends, together with Russia, are now beginning to pay the price in terms of lost market share to non-Opec producers,” he said.
He further added that while the fundamental outlook has improved during the past six months due to production cuts, supply disruptions and strong demand, the question that is now being asked is whether $70 per barrel was one step too far at this stage.