BULL-BEAR: Oil Prices Quarter 4/2017
|Crude oil price (USD/Barrel)||2016||2017F||2018F|
Source: EIC analysis based on data from leading international sources (as of August 22, 2017)
|EIC’s view: Bear
Crude oil prices will increase slightly in the fourth quarter of 2017, but remain low due to higher demand for oil during the winter season and from growing Asian economies, led by China. Nevertheless, oil prices may be pressured downward by a rebound in production among such OPEC countries as Libya and Nigeria that are now recovering from political turmoil. Meanwhile, the pact agreement between OPEC and non-OPEC is becoming less effective in reaching its goal to cut production by 1.8 million barrels per day, as the compliance rate has fallen to 75%. As such, the agreement will not have a significant impact on reducing oil supply. However, it is possible that the supply cut agreement could be extended beyond March 2018 and that the compliance rate could rise. Both of these possibilities should be watched because they are factors that could push oil prices up.
• Global demand for oil will likely rise in the fourth quarter as winter starts. The U.S. Energy Information Administration (EIA) forecasts global demand for oil to expand 2%YOY in the fourth quarter of 2017, to 99.5 million barrels per day, with the highest growth occurring in Asia, at 4%YOY. In particular, demand from China, the world’s second-largest oil consumer, will rise by 3.5%YOY to reach 13 million barrels per day.
• In July, supply from OPEC producers rose by 0.17 million barrels per day from the previous month. Libya and Nigeria drove the increase, after domestic political problems began to subside. Both countries are exempt from the agreement led by Russia between OPEC and non-OPEC nations to cut oil production by 1.8 million barrels per day.