Oil prices will remain above $70 this year as demand will offset the impact of potential increases in production
A Reuters survey on Thursday showed that although OPEC and Russia are considering increasing production, oil prices will remain above $70 a barrel this year due to strong demand and possible supply disruptions in Iran and Venezuela. Global oil stocks are under pressure.
Reuters survey of 36 economists and analysts showed that the average price of Brent crude in 2018 is expected to be US$71.68 per barrel, which is about US$4 higher than the US$67.40 per barrel that was estimated during the survey last month. This is higher than the average price of 70 US dollars per barrel this year.
“The recent fundamental factors are increasingly favouring oil prices. The geopolitical events surrounding Iran and Venezuela suggest that oil supply will further reduce, adding to the tight supply caused by OPEC and non-OPEC oil-producing countries’ production cuts,” said BNP Paribas’s Harry Tchilinguirian, head of global commodity market strategy, said.
OPEC, Russia and several other oil-producing countries agreed to cut production by 1.8 million barrels per day from January 2017 to reduce global excess supply. This has led to a rapid reduction in global inventories.
The decline in inventory, together with fears of Venezuela’s situation and the US’s resumption of sanctions against Iran, will further reduce supply, jointly fueling the recent rally in oil prices, and pushing the Brent crude oil index to rise above US$80 a barrel in May, setting a record since November 2014. The highest position.
In order to make up for the reduction in supply, Saudi Arabia and Russia have already held talks before the important OPEC meeting in June to increase oil production by 1 million barrels per day.
The price of oil has fallen by about 7% since this month’s high.
"Any increase in Saudi Arabia and Russia will be a bad signal, especially in the United States," said Abhishek Kumar, senior energy analyst at InterGax Energy's Global Gas Analytics.
However, some analysts said that Saudi and Russia’s increase in production will not completely compensate for the reduction in supply in Venezuela and Iran, and will only curb oil prices in the short term.
“We expect that increasing production will be a gradual process...increasing production of 180,000 barrels per day per month until the end of the year. This may not be enough to bring the oil market back to the supply surplus,” said Jan Edelmann, commodity analyst at HSH Nordbank AG. .
The survey estimates that the average price of U.S. crude oil futures this year is 66.47 U.S. dollars per barrel, about 7% lower than the average forecast price of Brent crude oil futures.
"The United States crude oil prices are lower than international indices, which will cause the market to increase demand for US crude oil," said Carsten Fritsch, an analyst at Commerzbank.
The US crude oil output in June is expected to hit a record high, making Brent crude more broadly than the U.S. light oil CL-LCO1=R litre, which is about $9 a barrel.
In the past two years, US crude oil production has increased by more than 27% to 10.73 million barrels per day, and analysts expect it to continue to increase by about 1.3 million to 1.5 million barrels per day this year.