Oil price forecast: Analysts see WTI averaging $56 in 2018.

 

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.

Friday afternoon, WTI Crude was trading at $60.12 and Brent Crude was at $66.87.

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.

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OPEC outlook sees US influencing global crude markets until 2025.

OPEC outlook sees US influencing global crude markets until 2025.

The Organization of Petroleum Exporting Countries expects US unconventional crude oil production from tight shale formations to increase the country’s global market influence through 2025, the chief economist for the cartel said on Dec. 7.

But Middle Eastern and Persian Gulf producers appear likely to regain their global market leadership by 2040, he added during a discussion about OPEC’s 2017 World Oil Outlook at the Center for Strategic & International Studies in Washington, DC.

“Tight oil supplies are the wild card. They have reshaped the global outlook in recent years,” observed Ayed S. Al-Qahtani, who directs the research division at the OPEC Secretariat in Vienna. “US tight oil supplies will be the most important contributor but are expected to reach their peak around 2025.”

Producers in the Middle East, most of which are OPEC members, have supplies that are relatively less expensive to produce, but about $10.5 trillion of investments will be required in the next 23 years, he said.

“We expect their exports to increase significantly after 2025, mainly to Pacific Asia,” said Al-Qahtani, adding that the forecast suggests demand will rise the most in China and India through 2040.

The outlook forecasts that global crude oil demand will climb to 102.3 million b/d by 2022 from 94.5 million b/d in 2016. Al-Qahtani said it appears likely to rise more quickly through 2020, when International Maritime Organization regulations for bunker fuels are due to take effect and more low-sulfur diesel fuel could be needed.

“In the longer term, we expect demand to reach 111.1 million b/d by 2040,” he said. “Most of this will be in transportation, where competition from alternative fuels is weakest.”

The number of passenger cars worldwide could double by 2040, largely driven by increases in economically developing countries, with electric vehicles representing 12% of the global fleet, Al-Qahtani said.

Downstream trends

“Downstream, refining capacity could increase by 19.6 million b/d by 2040, with Asia-Pacific and Middle East countries accounting for almost 70% of the total,” he said. “We expect refiners to add capacity in the middle of demand centers because that’s where the customers are.” About $1.5 trillion of investments will be needed to accomplish this by 2040, he said.

Al-Qahtani said OPEC anticipates that total worldwide energy demand will climb 35%, or about 96 million boe/d, through 2040. Crude oil appears likely to remain dominant as natural gas gains the most ground. “Fossil fuels are expected to remain dominant,” he said. “We expect technology, as well as policies, to continue driving emissions reductions and energy efficiency.”

Developing countries also appear likely to drive long-term economic growth globally, Al-Qahtani said. “Demand in [Organization for Economic Cooperation and Development] countries should peak in the early 2030s as their governments try to move from oil and coal to renewables out of climate concerns,” he said.

Responding to an audience member’s question, Al-Qahtani said it is OPEC’s policy not to try and predict specific prices. “We know that costs are going up, and we’re running out of cheaper supplies. That suggests prices will be higher, even without additional taxes,” he said.

“Predicting depletion rates is difficult. It’s hard to predict when you’ll run out of a resource,” he said. “I think profitability is the most important factor in deciding how long to produce something.”

Frank A. Verrastro, a senior vice-president and trustee fellow at CSIS who moderated the discussion, said, “A lot has changed in the last decade. The US clearly has a different role now than it did before, but it also faces a lot of above-ground challenges. How these are handled could determine how long this country’s new market position will last.”

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Natural Gas forecast for October 30, 2017

The natural gas markets initially fell during the week, reaching down to the $2.85 level but then rallied enough to form a bit of a hammer. However, this is a bit misleading as the Friday session with a massive gap higher that saw the market roll over to try to fill that gap. Nonetheless, there is still a significant amount of noise above, so I think that the sellers will return rather soon. The natural gas markets continue to be the realm of short-term traders mainly, as we have not had a significant move on the longer-term charts for several months. I think now that the markets have settled into this range, it’s almost impossible to deal with these markets from a longer-term perspective, so I believe that looking to short-term charts will be the best way going forward.

The $3 level continues to be a bit of a magnet for price, so I believe that the markets will be very noisy.

Looking at the longer-term charts, there is no clear direction at the moment, so I don’t see any reason to put money into the market for the longer-term play. Short-term traders of course will continue to flock in this market, because quite frankly it has been very reliable for some time. Alternately, we will eventually break out, but I don’t think were quite there yet. Ultimately, if we break above the $3.15 level, then we could start buying on the longer-term charts, but until then it’s almost impossible. Alternately though, if we break down below the $2.75 level, we could breakdown drastically. Overall, I prefer to trade this market from the hourly chart as we have such conflicting pressures over the last several months.

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Crude oil forecast for the week of July 24, 2017.

WTI crude prices are down showing a 1.5% loss. Weakness in the dollar was unable to help keep oil prices buoyed, while the breach in the Brent benchmark above $50.0 over the last day was seen as bullish-affirming price action. The looming OPEC-led meeting of major oil producers on Monday in St. Petersburg is an added bullish influence, along with tensions between Kuwait and Iran. The UAB’s energy minister said today that he hoped the OPEC-led production trimming would have a significant impact on crude prices in the third and fourth quarter.

Technicals

Crude oil prices were unable to hold gains seen early in the week. This is a divergence in though as many believe Saudi Arabia will come to the rescue and reduce exports. Prices tumbled 1.5% on Friday, but held support near the 10-day moving average at 46.18.  Resistance on crude oil is seen near the weekly highs at 47.74.  Positive momentum is decelerating as the MACD (moving average convergence divergence) histogram prints in the black with a declining trajectory which points to consolidation.

Unofficial OPEC Meeting will be Important

Next week will be a very import week for the crude oil market. While global demand appears to be edging higher, the markets are clearly focusing on supply, which has many components. While production will likely continue its current pace, next week’s unofficial OPEC meeting in Russia will be the catalyst that drives prices.

While there will unlikely be any production changes, Saudi Arabia has floated the idea that the country will reduce exports globally by 1-million barrels a day. The reduction in Saudi exports has already showed up in U.S. import numbers, despite increases in U.S. domestic production. Now, the Saudis are not saying they will reduce production, they are just saying they will reduce exports, which is directly targeting prices.  If inventories around the globe begin to shrink, except for inventories in Saudi Arabia, then there corning the market technique will have worked.

This week’s inventory data showed a larger than expected draw in petroleum inventories, which was likely cause by the reduction in Saudi exports. If the cartel cannot reach some form of agreement that will help oil bulls push prices higher, the markets will likely punish crude prices in the later stage of next week.

U.S. crude oil production forecast to average 9.9 million barrels per day in 2018

Meanwhile, the EIA forecasts that total U.S. crude oil production will average 9.3 million barrels per day in 2017, up 0.5 million barrels a day from 2016. In 2018, crude oil production is expected to reach an average of 9.9 million barrels a day, which would surpass the previous record of 9.6 million barrels a day set in 1970. Most of the growth in U.S. crude oil production from June 2017 through the end of next year is expected to come from tight rock formations within the Permian region in Texas and from the Federal Offshore Gulf of Mexico.

Imports Dropped This Week

The Department of Energy reported on Wednesday that U.S. crude oil imports averaged 7.8 million barrels per day during the past month which is down 1.7% month over month. The overall decline in imports has not been offset by increases in production which rose by 30K barrels domestically in the United States during the past week.

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Crude Oil Price Forecast 3rd July 2017

WTI Crude Oil

The WTI Crude Oil market bounced from the $42.50 level, breaking above the $45 level. It looks as if the buyers are trying to push towards the $47.50 level, but I would expect to see a lot of resistance in that area. I’m looking for and exhaustive candle to take advantage of as we certainly have a lot of headwinds when it comes to pricing of crude oil. The oversupply continues to be extreme, and of course the demand hasn’t exactly been stellar either. American producers continue to drive down the cost of oil as they fled the market.

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