What Will Happen to Crude Oil Prices in 2018?

With 2018 just weeks away, the question on everyone's lips is how the crude market will fare in the New Year. Predictions are already being thrown around by leading analysts, with the US Commodity Futures Trading Commission recently releasing a report suggesting that crude hedge funds are turning bearish.

Meanwhile, the US Energy Information Administration has released a Short Term Energy Outlook report predicting that US crude oil prices could settle at around US$49.7 per barrel in 2017. This would represent a 1.7% rise from a previous survey commissioned in September. As a result, US crude oil prices could climb to an average of US$50.6 per barrel in 2018. Ultimately, this would see the market perform 2% higher than previous estimates.

The EIA has also mused that Brent crude oil prices could climb 2.7% to average US$52.43 per barrel in 2017. Looking forward to 2018, this could see Brent spike to US$54.07 per barrel. This figure would outperform crude for a 4.8% higher than previous appraisals.

Production cuts support crude recovery

So what's fuelling the positive outlook? Experts maintain that it's largely due to production cut deals from major producers. This includes embargoes from global giants like OPEC and NOPEC. Analysts also suggest that falling US and global crude oil inventories could help push oil prices up in 2018. Statistics back this up, with analysts reporting that US crude oil inventories recently fell by 120 million barrels. Key drivers include strong domestic demand for refined products, as well as an increase in crude oil exports.

Could DUCs jeopardise the market?

Of course, some critics warn that the USA's glut of DUCs (drilled uncompleted wells) will hinder the market recovery. Others maintain that even if the wells are completed, the output will be gradual. Furthermore, they will offset the fact that production from major fields like Eagle Ford and Bakken is currently in decline. In fact, the Permian Basin is the only region that's currently increasing output.

Together, these key patterns will support the crude market and help push up oil prices in the first half of 2018.

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