Abu Dhabi: Oil is expected to trade above $75 (Dh275.25) per barrel in 2018 despite a rise in US shale oil production and plans of Opec to ease production curbs, according to analysts.
Oil prices went down significantly in the previous weeks as markets remained tense on Saudi Arabia and Russia’s statement on a possible production increment of one million barrels per day to stabilise oil prices. The move came after concerns grew over increases in oil prices over the past year and its impact on the global economic recovery.
Brent was down by 1.11 per cent at $76.46 per barrel and the US crude West Texas Intermediate (WTI) was trading at $65.74 per barrel, down by 0.32 per cent when markets closed on Friday.
Benjamin Lu, commodities analyst from Singapore based Phillip Futures told Gulf News that both Saudi Arabia and Russia are likely to raise the output levels into 2019 though the pace will be gradual and measured.
“Opec [Organisation of Petroleum Exporting Countries] is unlikely to waste its efforts in draining excess capacity and risk a rapid slide in oil prices to benefit from short-term gains.”
Opec in coordination with non-Opec members like Russia are cutting oil production by about 1.8 million barrels per day in order to help lower global oil inventories and prop up oil prices. The deal, which came into effect in January 2017 is expected to continue till the end of this year.
On oil price retreating to $50 to $60 per barrel, Lu said such a scenario is unlikely.
“US production has experienced exponential growth but ongoing pipeline constraints will keep output measured. It is also not within Riyadh’s interest to over produce amid Aramco’s impending IPO.”
“We postulate prices to maintain $75 to $80 per barrel for Brent and $65 to $70 for WTI in 2018.”
Ehsan Khoman, director, head of research and strategist for the Middle East & North Africa (Mena) at MUFG Bank said that oil prices are approaching a point where it is a concern for consumers and also for producers.
“Oil prices may be reaching their peak levels. As such, we believe that a sustained period of Brent above $80 per barrel and $75 per barrel for WTI will lead to demand destruction becoming more likely, through a combination of enhanced efficiency and a slowdown in the global economy.”
Meanwhile, drillers in the US continue to add rigs every week indicating that US production is set to go up in the coming months. According to Baker Hughes, a GE company US rig count is up two rigs from last week to 1,062.