2018: The year oil markets will become balanced
The energy industry minister of UAE believes 2018 will be the year the oil markets will see a complete balance between supply and demand levels. Industry experts are expecting another prosperous year of oil production but the major focus will be on achieving an equilibrium between supply and demand levels. Experts suggest the oil market will see corrections this year, allowing the industry to reach an optimum balance.
Late last year OPEC and ten other producers outside of OPEC, including Russia, confirmed to extend cuts to oil outputs in an attempt to increase oil prices. Since 2014 there has been a decline in global demand which has been exacerbated by a significant increase in shale production.
The agreement is due to expire at the end of this year, but producers will review the overall plan in June to analyze oil prices and global stockpiles. Recent rises in oil prices suggest growing market confidence, but experts believe any market correction was still in progress.
The energy and industry minister of UAE highlighted the compliance between OPEC members and non-OPEC producers ins agreeing to curb oil production levels. The minister believes this compliance will continue throughout this year and ensure the market remains relatively stable.
Oil prices achieved the highest level for several years this week, hitting $70 for the first time in three years. This was supported by a reduction in US production and lower crude inventories. Analysts expect brent prices to continue rising to around $75 per barrel by the end of this year. A critical factor that was holding back crude prices in 2017 was the massive increase in US production which has stalled, temporarily by a considerably icy winter in North America causing many facilities to shut down. Instead of hitting targets of 10 million barrels per day in January as forecasted, US production fell to 9.5 billion barrels per day. However, despite the decline, most analysts believe the US production will increase again and likely exceed the 10 million barriers relatively soon.
The minister emphasized that investment into the market would become the focus this year and whether the industry has enough investment to bring new oil to meet rising demands. Global industry growth is looking strong for this year so the industry will require further investments coming to market.
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