Crude oil prices to be under pressure in H1 of 2018: S&P
Benchmark US crude was up 0.7 per cent to $57.69 a barrel
Oil prices are expected to come under some pressure in the first half of 2018. Crude oil prices rose after key Opec oil ministers expressed a preference for extending crude output cuts until the end of next year, says S&P Global, the financial information and analytics entity.
On Thursday, benchmark US crude was up 0.7 per cent to $57.69 a barrel on the New York Mercantile Exchange. Brent crude, used to price international oils, gained by 1.1 per cent to $63.2 in London.
S&P Global said prices would remain rangebound, supported by output cuts by Opec (Organization of the Petroleum Exporting Countries), the petro exporters’ cartel, and capped by US shale oil growth.
Though the price has rebounded, it remains well below the highs of the past decade, unlike some metals (copper, zinc). This is in spite of supply discipline and steady demand. “This also brings the US shale response into sharper focus,” said S&P. Usually when Opec cuts production, it explained, US shale producers raised theirs’. Currently, however, promoters of shale fields have asked companies to restrain from overproduction; how they respond to Opec will be important for the market. The estimate is for oil to remain in the $50- 60/bbl range.
Chris Midgley, head of
CARE Ratings says India faces a short-term impact, as it imports 4.2 mn barrels a day, around 80-85 per cent of our consumption
analytics at S&P Global, said normalised stocks were lower than generally thought because of new infrastructure building, stronger demand and higher export of crude and products.
“However, weak seasonal demand and stock builds will put pressure on prices in the first half of 2018,” he said. Adding that northern hemisphere summer demand should provide more support to Brent prices in the second half of next year.
“Looking beyond next year, we anticipate potential supply tightness as lower investment curtails production growth against continued robust demand, supported by low prices and healthy economic growth,” added Midgley.
Opec members decided last year to reduce crude output by 1.2 million barrels a day from October 2016 levels, to 32.5 mn a day, to draw down a global stock overhang and rebalance supply with demand.
CARE Ratings says India faces a short-term impact, as it imports 4.2 mn barrels a day, around 80-85 per cent of our consumption. The impact will be felt in terms of a trade deficit, on the markets, oil prices and exchange rate.
“We believe prices of Brent will rise but not exceed $65/bbl, as there remains a possibility of rising US inventories and production, which will be keep (rising) prices at bay... but also at the same time, prices to remain above the $60/bbl range, not below that for the time being.
The Indian basket of crude to remain $2/bbl lower than the Brent prices on an average monthly basis,” says CARE. The Indian basket of crude purchase was $61.6 a barrel on Wednesday.