A new wave of surging U.S. production will knock prices lower again
Brent oil prices could tumble more than 20% by 2018, as U.S. output surges and adds renewed pressure on an oil market that is already battling with a persistent oversupply, according to Ian Taylor, chief executive officer at Vitol Group, the world’s largest oil trader.
Speaking at the Oil & Money conference in London on Wednesday, Taylor warned that there’s currently a consensus in the industry that prices will go higher, but that such an unanimity “can be dangerous.”
“We are all expecting a little bit of tightening to come through because we all see demand growing next year at a pretty good rate, we all expect OPEC to hold together and we expect probably the capital disci“So it’s guaranteed we are all going to be wrong. And I think there’s a chance oil could fall closer to $40 than $50, because I think there’s still one more big surge coming from U.S., which will knock prices down,” he said, pointing to $45 per barrel as his 2018 forecast.
Brent prices LCOZ7, +0.05% traded around $58 on Thursday, so Taylor’s prediction would indicate a 22% slump from current levels.
U.S. shale output has been singled out as one of key reasons oil prices came crashing down in the summer of 2014 and still haven’t recovered to their former glory. Both crude oil CLX7, +0.16% and Brent are still around 50% lower than their 2013-2014 peaks. In response to the price plunge, the Organization of the Petroleum Exporting Countries and a group of non-cartel members have agreed to cut production until March 2018 in an effort to reduce the global supply glut.
However, the U.S. isn’t part of the accord and has been able to grow market share as other global players have frozen or scaled back their output. U.S. shale oil production is expected to rise for an 11th straight month in November, by around 82,000 barrels a day to 6.12 million barrels a day, the U.S. Energy Information Administration said this Monday.
However, not everyone at conference was a downbeat on the outlook for oil. Jeremy Weir, chief executive at commodity trader Trafigura and chief executive for the oil and gas division at Glencore GLEN, +0.79% GLCNF, +0.28% sees prices trading closer to $60 a barrel next year.
Maxwell Technology 