Americas News
Oil Prices Seen Lower in 2018 After OPEC's "Christmas gift" to U.S. Shale
Although Friday saw crude prices escalate despite the fruition of a previously much-feared rise in U.S. production, the analytical community agrees that the Organization of the Petroleum Exporting Countries (OPEC) has paved the way for another American shale boom in the New Year.
Tom Kloza, founder of the Oil Price Information Service, said, "OPEC basically gave a Christmas gift to U.S. shale producers," meaning the cartel's extension of its production cuts enables shale to make inroads in world markets and encourages greater output.
Kloza noted that while the U.S. surpassed 9.7 million barrels per day in crude output - something that hasn't happened since April 1971 - he said that figure will reach 10 million by early next year.
He also disputed notions in some quarters of the potential for crude prices to reach $70: "Look, $70 is possible, but it's probably as possible as the Jets making it to the Super Bowl.
"It would take some sort of disruption in Libya or Nigeria beyond what we've seen in the last couple of years."
Stephen Schork, editor at The Schork Report, told CNBC that oil prices will fall to the lower $50s due to "the fact that U.S. production continues to hit records and a nice build in gasoline", and that the current high prices for crude are at the top of the market.
He said, "We've had a significant run since the hurricanes of early August and September.....but a lot of that upward swing was based on speculative money pouring in."
Oliver Sloup, vice president of Blue Line Futures, told Bloomberg that the market this week has technically stalled out, and that combined with the lack of bullish media headlines has led to some long liquidation, which in turn might result in $54.30-$55 prices; also, the U.S. pumping of 9.71 million bpd "puts a lid on the market," he said.
In stark contrast to Kloza, Schork, and Sloup is Goldman Sachs, which earlier this week raised its forecast for 2018 Brent and West Texas Intermediate to $62 and $57.50 per barrel respectively, a move reportedly influenced by OPEC's resolve in maintaining its production cuts.
