Annual market roundup and longer-term forecast
It is sometimes difficult to imagine that the next year in the oil business can possibly be as interesting as the last year. But 2017 proved to be full of events and developments which impacted the oil market, some more anticipated than others. Like OPEC and non-OPEC oil producers walking the talk and complying with the oil production agreement of cutting 1.8 mio. barrels of oil per day. Or extreeme weather conditions in the U.S. halting production and refineries for weeks along with end-of-year huge pipeline outages in the North Sea.
The list is long, but let's focus on the year to come. OPEC and some non-OPEC oil producers will continue operating under the limits of the current oil production cut deal of a total of 32.5 mio. barrels per day, at least until their meeting in June where the deal will likely be up for review. Estimates of the U.S. oil production are that the shale oil producers will likely expand production to around 10 mio. barrels per day this year. The current geopolitical risk premium seems elevated and could potentially cause increased oil price volatility should the situation in e.g. Iran, Venezuela or Libya escalate. All in all, the likelyhood of elevated oil prices this year seems imminent. Read why on the following pages.