Uncertainties to trigger price hikes
Balanced supplies and improving demand from top consumers will push up global oil prices this year amid lingering uncertainties, experts said.
“Much of the uncertainties in the global oil markets hinge on the quantity of shale oil that the US would actually produce this year,” said Lin Boqiang, a senior energy researcher at Xiamen University. He said that a higher output of US shale oil would push down prices even though the current supply and demand trend is balanced.
Yet another factor that could drag down prices is the reluctance by companies to make additional capacity expansion investments due to fluctuating price trends. But with demand improving in the last few months, there could be some production scale-ups, he said.
Han Xiaoping, chief information officer of China Energy Net Consulting, said the ongoing problems in Venezuela and geopolitical tensions in the Middle East may also increase uncertainties.
Oil supplies have tightened after production cuts were announced by the Organization of Petroleum Exporting Countries and Russia early last year. The OPEC cuts are expected to continue through this year, with the goal to cap production capacity at 32.5 million barrels per day.
But the task to balance supplies may not prove easy as oil production in the United States, another major oil producer, has soared more than 16 percent since mid-2016 and is approaching the 10 million bpd mark.
Demand from major consumers, led by China, has risen substantially in the last year despite ongoing efforts to switch to cleaner fuels.