Oil analysts now more bullish after Opec deal
bengaluru — Oil analysts have raised their forecasts for the crude price next year after major producers agreed to extend output cuts, a Reuters poll showed on Wednesday.
Political tensions in Saudi Arabia, production disruptions in Libya and Nigeria and economic depression in Venezuela that has cut crude output will also support oil prices, the analysts said.
Benchmark Brent crude futures are now forecast to average $58.84 in 2018, up more than $3 from $55.71 estimated in the previous poll at the end of October.
The Organisation of the Petroleum Exporting Countries (Opec) and non-Opec producers, led by Russia, last week extended their deal to cut output by 1.8 million barrels per day (bpd) until the end of 2018 to end persistent oversupply.
The group signalled it may stage an early exit from the deal if the market overheats and triggers too much of a price rise.
“The Opec cut extension is expected to send a positive signal regarding faster rebalancing in the oil markets... Strong compliance is expected from Opec as the Opec economies are still heavily dependent on oil revenues to meet their fiscal budget deficits and hence they need higher oil prices,” said Rahul Prithiani, director at CRISIL Research.
Some analysts, however, expressed doubts over compliance from non-Opec countries, especially Russia, which has plans to expand production from its newer oilfields. “The main positive surprise involved Libya and Nigeria, previously exempted (from the deal), which will now be subject to a cumulative production cap,” said Daniela Corsini, commodity market economist at Intesa Sanpaolo in Milan. Oil prices fell on Wednesday after a surprise rise in U.S. inventories of refined products in what the market interpreted as a sign of flagging demand. Brent crude futures were down 48 cents at $62.38 a barrel by 1002 GMT, down 2 per cent since last Wednesday, while U.S. crude futures were off 46 cents at $57.16 a barrel. With global equities under pressure from sliding technology stocks and the U.S. bond market suggesting investors are cautious about the outlook for economic growth, industrial commodities such as crude oil and copper are feeling the pinch this week.
Supply cuts by the Organization of the Petroleum Exporting Countries, Russia and other producers that were extended last week to all of next year have helped lift Brent prices by more than 40 per cent since June. — Reuters