KHALEEJ TIMES, Thursday, Dec 7, 2017 | Rabi Al Awwal 18,1439
Oil analysts get more bullish after Opec deal
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
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
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.