Crude Hold Near $50, but Russia Warns of a Slide to $40/bbl in 2018

Russia has warned of a slide to $40/bbl in 2018 for crude. File Image / Pixabay

Even though Friday saw slight contractions for crude, the numbers have propelled the commodity to a near five month high, making this the most bullish week since July - and again, experts credit the International Energy Agency report released earlier this week outlining production declines and shrinking stockpiles for the positive performance.

West Texas Intermediate was down 21 cents at $49.68 per barrel for a nearly 5 percent weekly gain, its strongest in almost two months; Brent dropped 3 cents to $55.44.

Panmure Gordon summarized the bullish sentiment by observing, "Prices have now advanced for the last two weeks off increased demand forecasts from both OPEC [the Organization of the Petroleum Exporting Countries] and the IEA, combined with the near-term demand uplift expected as U.S. oil refineries seek to restart operations post-Hurricane Harvey."

HSBC analysts added that 2017 is set to be an "extremely strong year" for demand growth: "We remain convinced of longer-term upside to crude prices; with the lack of new major project sanctions, we expect conventional non-OPEC supply to start declining post-2018."

HSBC's prices forecast is the most optimistic of those in the bullish camp: its Brent assumptions for 2018 and 2019 are $65 and $70 per barrel respectively.

Still, many claims about a market rebalance and crude escaping its range-bound domain have been made in the recent past, only to have circumstances prove otherwise; and just one indication that potential trouble lies ahead is a new development in Venezuela, which on Friday published the price of its oil and fuel in Chinese currency - president Nicolas Maduro's way of shunning the U.S. dollar following Washington's charge that his leadership is undermining democracy.

Russia isn't buying into this week's feel-good sentiment either: Elvira Nabiullina, the head of that country's central bank, said on Friday that she thinks oil prices may fall as low as $40 per barrel next year.

Arguably the strongest statement this week that nothing much would change for the oil industry in the near term came from Eric Nuttall, senior portfolio manager with SPR & Co., who said that for crude to sustain its current $50-plus price, traders require "increasing clarity on OPEC's strategy on eventually bringing back barrels onto the market and the possibility of an extension beyond March."