2018 Oil Price Forecasts

 

A recently-published Goldman Sachs research note raised next year’s Brent price forecast from $58 to $62 per barrel and its West Texas Intermediate projection from $55 to $57.50 per barrel. The study cited lower inventories and a deal led by the Organization of the Petroleum Exporting Countries as the primary reasons for the rising oil price forecast.

The OPEC-led meeting in Vienna resulted in Russia, Saudi Arabia, and other global producers striking a deal to extend production cuts until the end of 2018. Though the move was telegraphed ahead of time, producers indicated they could exit the deal if the market was overheating.

According to Goldman Sachs analysts, led by Damien Courvalin and Jeffrey Currie, the deal “leaves room for an earlier exit than currently scheduled, we now reflect this resolve in our supply forecast, with full compliance for longer and a more modest exit rate.”

 

 

Meanwhile, the move also incentivizes non-OPEC countries to increase their output. The United States, for example, surpassed 9.7 million barrels per day in crude output. Tom Kloza, who runs the Oil Price Information Service, predicts the number will reach 10 million by early 2018. “We may be at a record right now for shale,” he said. “It establishes a stronger bottom for crude oil.”

Goldman agrees that “risks remain, and we see these as skewed to the upside into 2018 on the risk of an over-tightening, either because of new disruptions, demand exceeding our optimistic forecast, or OPEC letting the stock draw run hot.” They also noted that the response of shale oil and other producers to higher prices would likely incentivize OPEC and Russia to scale back their now greater capacity, thus leaving risks to prices skewed towards the downside over the long term.

Kloza maintains that the West Texas Intermediate crude will hover around $55 per barrelversus Goldman Sachs $57.50, while others are predicting much higher increases. “You hear these people talking about $70,” said Kloza. “Look, $70 is possible, but it’s probably as possible as the Jets making it to the Super Bowl. So, it’s very, very improbable. It would take an event. It would take some sort of disruption in Libya or Nigeria beyond what we’ve seen in the last couple of years.”

Goldman continues to be optimistic, projecting 350,000 barrels a day above OPEC’s own forecasts and 550,000 barrels above the International Energy Agency’s forecasts.

The sunny predictions only last through next year, however. In 2019, Goldman sees the WTI slipping back to $55 per barrel and Brent to $59.50. In 2020, WTI is estimated at $50 with Brent at $54.50. “Looking further out, we believe that shale and other producers will start to respond to a higher price signal, which may lead OPEC and Russia to more aggressively ramp up within their spare capacity,” said the analysts. “Greater backwardation will, in turn, provide long investors with positive returns despite a spot forecast near current levels, and we forecast +9% crude total returns over the next 12 months.”

 

Did you miss this?

Other Popular Stories

  • Google's self-driving cars revealed to media for first time
  • Will quotas, targets and better technology get more drivers into EVs?
  • IBM reveals super-efficient solar power system prototype
  • 7 Award winners honoured for championing ontario's environment's zero-waste, low-carbon initiatives
  • New GO buses will be assembled in GTA
  • BMW to invest 6 per cent of revenue in R&D; plans to streamline manufacturing to pay for research
  • China’s Drive for Clean Energy Results in Winter Gas Shortage
  • MRO in space: Inside a routine Maintenance-Repair-and-Overhaul mission with NASA: sealing, lubricating and keeping cool
  • Economy outperforms in January; manufacturing leads broad-based growth
  • GM/Honda latest partners in search for affordable fuel cell car
  • "Fireworks" in Canada's economy as GDP rises 2.3 per cent in January
  • Héroux-Devtek subsidiary to provide landing gear for Boeing 777
  • Microsoft acquires Montreal AI firm that creates "curious" machines that think like humans
  • Petronas deal could get LNG moving in Canada
  • Vitamin-derived battery created by U of T chemists
  • Research: What is the temperature effect on battery backs in Electric Vehicles: charging up to 3 times longer in coldest temperatures
  • What's old is new again: Airship innovation, the Lighter-Than-Air aircraft
  • Singapore scientists invent bendable concrete for low-maintenance roads
  • Molson Coors reports on environmental stewardship goals
  • Canada could lead the world in cleantech: report
Scroll to Top