2017 ends on positive note for oil market, what about 2018?
Baku, Azerbaijan, Dec.22
By Leman Zeynalova – Trend:
The price of Brent rose in the second half of the week following a large fall in stocks of US crude oil, according to the British economic research and consulting company Capital Economics.
“The prices of most commodities edged higher this week, bolstered by a weaker US dollar. The decrease in inventories was mainly due to the strength of demand from refineries, which processed about 0.4 million barrels per day more crude last week than at the same time in 2016,” said the analysis obtained by Trend.
However, the tax reform by US President Donald Trump will likely put downward pressure on oil prices in 2018.
The sharp tax cuts for businesses will give rise to shale oil production in the US, which will undermine OPEC efforts to reduce the oil supply.
The reduction of taxes from 35 percent to 21 percent will accelerate global competition for investment attractiveness. This will encourage oil and gas companies for increasing shale production in the US, as the reduction of taxes will enable them to increase the profitability of shale oil output.
Therefore, in the first quarter of 2018, the US will increase profitable oil and gas production. This will add more volumes of oil to the market and subsequently led to a decrease in oil prices to the detriment of OPEC deal.
Brent crude oil prices will range between $60 and $55 per barrel throughout 2018, according to Capital Economics.
This is while the UK company forecasts West Texas Intermediate (WTI) oil prices to vary between $56 and $52 per barrel next year.
The quarterly forecast for Brent is as follows: $60 per barrel in Q1 2018, $58 per barrel in Q2, $56 per barrel in Q3 and $55 per barrel in Q4, according to Capital Economics.
The company expects WTI prices to stand at $56 per barrel in Q1 2018, $55 per barrel in Q2, $54 per barrel in Q3 and $52 per barrel in Q4.
As for OPEC basket price, Capital Economics forecasts it to start the year with $57 per barrel in Q1, $55 per barrel in Q2, $53 per barrel in Q3 and $52 per barrel in Q4 of 2018.
Follow the author on Twitter: @Lyaman_Zeyn