Oil prices risks “cascading downwards” in 2018 as some analysts warn that the $70 per barrel value of Brent is unsustainable.
Speculative stances in the oil futures market have grown to an all-time high, said the commodities strategist at ETF Securities, Nitesh Shah, and pressure is beginning to build on oil prices.
Shah stated: “Any small negative news around the oil market could see oil prices cascading downwards,”
Yesterday, oil took a blow when the US Department of Energy said that for the first time, production in the United States had surpassed the 10m barrel per day milestone since 1970. However, today, prices rose back to more than $69 a barrel after a survey revealed that the Organisation of the Petroleum Exporting Countries (Opec) still had a strong commitment to its cuts in supply.
The technical analyst at Forex, Fawad Razaqzada, said that production in the United States was likely to keep increasing, heaping pressure on its prices. Razaqzada stated: “If oil prices have any chance of remaining elevated, the growth in demand for oil needs to outpace that of supply. This is unlikely in our view.”
A research analyst at Accendo Markets, Henry Croft, added to the bearish sentiment, saying that oil prices may likely top out sooner rather than later.
He said that Opec would have no incentive to prolong the cuts in supply that have buoyed the market, with numerous ministers from Opec countries saying that they are comfortable with oil prices within the range of $60 to $70.
As prices tend to drop during the first half of the year, an analyst at Hydrocarbon Capital, Malcolm Graham-Wood, predicted that Opec may be able to relax its output curbs sooner than expected if the oil prices are still holding up within the $65 to $70 per barrel range by June.
Today, Goldman Sachs predicted that Brent would top that range in 2018 as it increased its price forecasts on the oil market rebalancing six months sooner than what was initially expected.
Its forecast for three, six and twelve-month Brent oil price was increased to $75, $82.50 and $75 a barrel, respectively, from the $62 previously.