Oil price showed less volatility in 2017, presented rising signs primarily owing to production cuts of around 1.8 million barrels per day (bpd) by both OPEC and some Non-OPEC producers. The Oil industry in 2018 received stimulus through upward oil and gas price corrections resulting in renewed interest in upstream investment. Downstream companies generated desirable returns to remain in the hunt for growing business. Earlier this year, Moody's and S&P predicted average oil price to be around $55 per barrel, whereas Goldman Sachs and Credit Suisse predicted Brent price to be $62 and $60 per barrel in 2018. EIA forecasted Brent spot prices to average $57/b in 2018, up from an average of $54/b in 2017 and West Texas Intermediate (WTI) crude oil prices are forecasted to average $4/b lower than Brent prices in 2018. Commodities traders also predict the price of oil in their futures contracts. They predict the WTI price could be anywhere from $52/b to $78/b by July 2018.
Based on emerging geopolitical factors, OPEC and some Non-OPEC oil producers’ cohesive agreement to production cuts throughout 2018, Hedge funds are backing higher oil prices in 2018. On 22nd Apr’18, WTI crude (Nymex) and Brent crude (ICE) were trading at $ 68.40/bbl and $74.06/bbl respectively, registering a rise of around 51% over the previous year.
Worldwide crude oil prices may average $70 a barrel in 2018 and in 2019. In Mar’18, global oil prices averaged $66/b after briefly hitting $70/b in January. Prices spiked when traders responded to the November 30, 2017, OPEC meeting. The oil cartel's members agreed to keep production cuts through 2018.
Despite higher production from US, emerging global demand-supply scenario suggests that crude oil buyers will have to pay higher price in 2018 compared to 2017. Major factors which influenced price of crude in 2017 include unified decision by OPEC to maintain production cut, shutdown of the 400,000 barrel/day Forties line in the North Sea, and declining production in Venezuela.
Recently Australian petrol prices have also jumped to the highest level since 2014 in the aftermath of the strategic bombing of Syria by coalition forces. The wholesale pricing of fuel making its way into Australia through Singapore has jumped at a staggering 14% from 2017. As a result the average price of fuel is 10 cents higher than at the same time last year, at $1.42 a litre with fears the prices will continue to rise. Experts warn that the conflict in Syria will continue to have an impact on the price of fuel which in turn will impact Australians at the service station.
The recent events in Syria have given an early indication of how easily the fuel market can be upset. What we're seeing now with Syria is an example of a disruption that, if it got out of control, may have a serious effect on our way of life here in Australia. Any rise in the price of fuel on the back of continued conflict in Syria would eventually have a ripple effect on other aspects of Australian life such as with inflation. It would be wise to keep an eye on this aspect.
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