(EnergyAsia, December 23, 2017, Saturday) — Without much fanfare, the oil markets have recovered strongly over the past year, with Brent crude rising by nearly a quarter or US$10 a barrel, said the US Energy Information Administration (EIA).
After crashing to a 12-year low of $43.74 a barrel in 2016, Brent is expected to average US$53.88 this year. The EIA expects the recovery to continue into 2018, with the North Sea benchmark crude price rising another 6.2% to average US$57.26 a barrel.
Brent recently climbed to a 30-month high when it broke through US$65 a barrel on December 13.
The EIA attributed the recovery to strong demand growth and declining global inventories in recent months.
In its latest short-term forecast, the agency said it expects global oil demand growth to exceed 1.4% in 2017 and 1.6% in 2018. Significantly, global oil consumption could breach the psychological 100-million b/d mark for the first time.
The EIA said the recent decline in global inventories helped ease three years of bearish pressure on prices.
“Since reaching a record high of almost 3.09 billion barrels at the end of July 2016, total OECD liquid fuels inventories have fallen by 137 million barrels to 2.95 billion barrels at the end of November 2017,” it said.
“Over the same period, the surplus to the five-year average has declined by 210 million barrels, ending November at an estimated 174 million barrels.”
The Organisation for Economic Co-operation and Development (OECD) has 35 member countries including the world’s industrialised economies.
The EIA seems conflicted in its outlook for the oil markets in 2018. It expects oil prices to rise even in the face of increases in global oil production and inventories.
“Demand growth is not forecast to keep pace with supply growth, resulting in global liquids inventories increasing modestly in 2018,” it said.
Contrasting the EIA, the World Bank was clearer in its forecast for why oil prices would rise from an average US$53 per barrel in 2017 to US$56 next year. In its report on the commodities market, the bank said it expects the oil markets to rise on “strong demand and restraint in OPEC and non-OPEC production despite projected increases in US shale production.”
Neither agency cited the possibility that geopolitical tensions, out of favour the past three years, may return to haunt the oil markets.