EMEA News
JPMorgan Sees Brent at $47 in 2018, Others See Prices Falling to $10 Within 8 Years
Two different prognostications on Friday paint a gloomy picture for crude prices both in the short and long-term, with one respected analyst blaming U.S. president Donald Trump for setting into motion a potential series of events that could result in $47 oil as early as next year.
Scott Darling, head of regional oil and gas at JPMorgan, told Bloomberg television that Trump's move on Friday to decertify the multi-nation agreement that lifted some of the international sanctions against Iran will have significant impact on the oil market and cause upside risk.
He noted that the lifting of sanctions by former president Barack Obama resulted in Iran's production rising from 3 million barrels per day (bpd) to just under 4 million bpd, a doubling of exports, and international oil companies finalizing investments in the Islamic republic; but with Trump's hard-line stance, "you could see a challenge for Iran to get any investment and deliver on its production."
To what extent such statements are motivated by a firm grasp of the conditions of the deal that lifted the sanctions or just an overall resentment of Trump is unclear, but up until recently Iran had been resoundingly criticized by energy analysts for thumbing its nose at the Organization of the Petroleum Exporting Countries (OPEC) cutback strategy and pumping full-tilt, thus exacerbating the global glut.
Darling went on to predict that 2018 will see Brent at $47 "predicated on less compliance as we go into next year, also U.S. shale continuing growth.....and also non-OPEC supply beating the market's expectations, like the former Soviet Union countries."
JP Morgan also believes there's only a 50/50 chance will agree to an extension of OPEC's cutbacks beyond their expiry of March of next year.
As for crude's long-term fate, get set for oil at $10 per barrel over the next six to eight years: that's the contention of Chris Watling, chief executive of Longview Economics, who thinks the price drop will be caused by alternative energy fuels attracting more and more investors.
Watling justified his forecast by noting, "what happens with electric vehicles is really, really important" given that around 70 percent of oil is used for transportation.
"I mean, 120 years ago the world didn't live on oil; oil hasn't always driven the global economy… the point is alternative energy in some forms is gathering speed (and) things are changing."
Prior to Trump calling for decertification and before the reporting of evidence that it cheated on its nuclear deal, Iran bragged that it will reach an oil production rate of 4.5 million bpd within five years and that exports will reach up to 2.5 million bpd within the same time frame.
