Expectations of robust oil demand growth and high OPEC and allies’ commitment to the production cuts have prompted analysts to raise again their forecast for oil prices in 2018, and they now see WTI averaging $55.78 per barrel next year.
According to a Reuters poll of 32 analysts and economists on Thursday, WTI is expected to trade at an average $55.78 a barrel in 2018, compared to the previous forecast of $54.78 a barrel in the survey carried out right after OPEC and the non-OPEC producers part of deal extended their agreement through the end of 2018. Back then, analysts cited the extension as a sign that the oil market rebalancing could speed up.
In today’s poll, the experts surveyed by Reuters also raised their average forecast for Brent to $59.88 per barrel next year, up from the previous projection of $58.84 a barrel.
Analysts see solid global economic growth supporting high oil demand in 2018, while expectations of strong OPEC and friends’ commitment to the cuts are forecast to support oil prices next year as supply will be relatively tight.
Increased supply from U.S. shale, however, will cap significant oil price gains next year, but concerns over an abrupt supply glut have somewhat abated.
“We see U.S. supply continuing to grow next year but are less concerned about a sudden supply glut re-emerging as rising D&C [drilling and completion] costs will likely slow production growth,” Ashley Petersen at Stratas Advisors told Reuters.
Also on the supply side, outages in Libya and Nigeria, as well as potential new sanctions on Iran, could also tighten the market and lend support to oil prices in 2018, the analysts polled by Reuters say.
Earlier this week, an explosion at a crude oil pipeline feeding Libya’s biggest oil export terminal sent WTI briefly breaking above $60 per barrel on concerns over yet another sudden supply disruption, just as the operator of the Forties Pipeline in the North Sea, Ineos, said on Thursday that it expected to bring the pipeline progressively back to normal rates around new year.