Abu Dhabi: Oil is expected to remain volatile this quarter, and the next, as different factors pull prices in opposite directions, analysts say.
On the supply side, sanctions on Iranian crude exports, and deeper production losses in Venezuela, are expected to push prices upwards but increased output from Organisation of the Petroleum Exporting Countries (Opec) and non-Opec members should help cap the gains.
Opec and non-Opec members like Russia are increasing production by about one million barrels per day to cool down oil prices and help the growth of economies in the emerging markets.
Brent, the international benchmark for oil prices was trading at $76.83 per barrel, up by 0.43 per cent and the US crude West Texas Intermediate was at $67.75 per barrel, down by 0.03 per cent when markets closed on Friday.
“The demand side has looked more bearish. The economic outlook has become increasingly challenging-especially for emerging markets and ongoing trade disputes are stocking fears,” Emma Richards, head of oil and gas at Fitch Solutions Macro Research told Gulf News.
“We assume an average in the high $70 per barrel for Brent for the rest of the year, but that’s definitely on the bullish side.”
Richards also said there is potential for some big movements on the trade front, both in terms of NAFTA (North American Free Trade Agreement) and the US’ decision on extending tariffs on China.
“If we see the US-China trade dispute escalate significantly, that could see Brent paring some of its recent gains. We’ll probably get some Opec data releases starting to come out this week ahead of the monthly data report too. Any surprises there could definitely move the needle.”
On the impact of Iran’s sanctions on oil prices, she said the issue would be the main price driver on the supply side.
“It represents the biggest potential loss of supply globally over the next few months and the biggest question at the moment is whether or not that tips the market into deficit.”
US president Donald Trump reimposed sanctions on Iran earlier this year and asked all countries importing oil from Iran to completely halt purchases by November 4 or face US financial measures with no exemptions.
Francisco Quintana, head of strategy at Foresight Advisors predicts a balanced market in the last quarter of the year.
“First, we expect part of Iranian oil to continue to be exported to China and India, reducing the impact of sanctions in the international markets.”
“Second, we think that Opec and its allies will loosen its grip on production to offset the decline in Iranian exports.”
Brent prices are likely to average $72 a barrel in 2018 and the end of the year prices at $71 per barrel, he added.
An Opec and non-Opec technical committee will later this month discuss proposals for sharing out an oil-output increase, sources familiar with the matter said, a tense topic for the producer group after it decided in June to ease supply curbs, according to a report from Reuters.
A panel called the Joint Technical Committee will on September 17 consider proposals on distributing the agreed output increase of 1 million barrels per day, the sources said. The discussion had earlier been planned for next Tuesday.