KUALA LUMPUR: With oil prices already hovering between US$55 and US$60 per barrel at present, OCBC Bank expects prices to head marginally higher to at most US$70 per barrel in 2018 against a backdrop of a strong global demand and tame supply.
OCBC Treasury Research and Strategy economist Barnabas Gan said 2018 could prove to be different, fraught with even more uncertainties that are bereaved of answers.
He said geopolitical tensions remain high on the list while energy demand could moderate into the year given a strong second half in 2017.
“The upside risks for crude oil prices in 2018 is limited, although the rally momentum has picked up into the second half of 2017.The higher prices of late have also triggered more US oil supplies.
“Even so, the oil rally to-date remains extremely fragile and market-players will not hesitate to bring oil prices lower again,” said Gan, adding that production cuts could be withdrawn which may result in a supply glut.
OPEC’s plan to limit supplies in an effort to buoy prices has come to fruition, especially with the rally in prices and narrowing supply glut.
With the uncertainty over how supplies might trend, an unexpected shortfall in energy demand would then mean another bearish year for crude oil.
“To that end, we do not see much head room for oil prices to gain into 2018,” said Gan.
Supply-wise, with the recent OPEC’s “soft” deadline to extend oil curbs for nine months could mean an earlier-than-expected cessation of the deal while a further rise in prices could well be met by stronger US production, suggesting that upside risks could well be limited into 2018.