Oil prices are unlikely to advance higher than $70 a barrel in 2018, with the market caught between the opposing forces of OPEC-led production cuts and surging US output, a Reuters poll showed on Wednesday.
The survey of 34 economists and analysts forecast that Brent crude will average $62.37 a barrel in 2018, up from the $59.88 forecast in the previous monthly poll.
“Steady demand growth, a clear commitment to supply restraint by key OPEC producer Saudi Arabia and persistent geopolitical risks will all help to keep a floor under oil prices,” said Cailin Birch, an analyst at the Economist Intelligence Unit.
“However, we expect strong production growth from the US, as well as some opportunistic selling by both OPEC and non-OPEC members later in the year, to prevent prices from rising much higher than $70 per barrel on average.”
Brent crude is on track for a fifth straight monthly gain, having averaged about $69 so far in January, but analysts said the rally is unlikely to last beyond the first quarter.
They said US production, which has risen more than 17% since mid-2016, could top 10 million bpd—a level surpassed only by Saudi Arabia and Russia.
Rahul Prithiani, director at CRISIL Research, expects oil prices to range between $62 and $67 a barrel in 2018, citing rising US oil output.
Meanwhile, the world’s biggest oil consuming region, Asia, has recently started to import US crude and could show increased appetite to draw more shipments east, analysts said.
The higher production has paved the way for a widening gap between US crude prices and both the Brent and Dubai benchmarks, making it cheaper for Asian countries to import US crude despite high freight costs.
“As long as WTI continues to trail other regional crude benchmarks, US oil should continue to find its way towards Asia,” said Giorgos Beleris, analyst at Thomson Reuters Oil Research and Forecasts.
US light crude is forecast to average $58.11 a barrel in 2018, up from the $55.78 predicted in the December poll. The contract has averaged about $63.63 thus far in 2018.
Alongside the growth in US oil output, the $65-plus price environment is encouraging other non-OPEC exporters, such as Brazil and Canada, to ramp up production through new projects.
The poll forecast Brent crude to average $61.62 in the fourth quarter and $61.29 in 2019.
Add new comment
Read our comment policy before posting your viewpoints