The Brent price in the end of the year will constitute $55 for barrel, - Saxo Bank

The oil market can finish 2017 with the best result since against the background of excess of the offer in 2014 there was a recession in this market, the head of department of strategy of Saxo Bank in the commodity and raw market expert Ole Slot Hansen told, Trend reports.

 

"The efforts of OPEC and other extracting countries on production restriction made this year, at last, took effect, and excess of the world supply of crude oil began to decrease. During the Gulf of Mexico storming on the coast in the State of Texas of the hurricane "Harvey" fuel reserves in the USA significantly were reduced, and this circumstance will promote growth in incomes of the oil processing entities and will support an oil demand during this period when seasonal recession is usually observed", - Hansen considers.

According to him, in the first half of the year rise of production in Libya and Nigeria and also among the American companies developing slate fields has an adverse effect on oil cost.

"The fallen prices were probably reflected in the offer of the energy carrier in the USA stronger, than it was expected, and Libya and Nigeria will hardly manage to increase production amounts significantly in the nearest future. Oil refineries postponed scheduled and repair work to use demand which sharply increased after the hurricane "Harvey". Within a month after a natural disaster inventories of gasoline and diesel fuel in the USA were reduced by 24 million barrels. On an average in five years to an indicator usually during this period the surplus on 2,5 million barrels was observed", he said.

Hansen noted that the OPEC and other extracting countries will be glad that the price difference between grades of WTI crude oil and Brent increased and at the moment constitutes about six dollars for barrel.

"Return of the Brent market to a condition of backwardation not only increases profitability of those producers which use the spot price for calculation, but also attracts on the market of the financial investors wishing to earn on prolongation of line items. Lagging of the price of a grade of WTI almost for six dollars also gives some guarantee that the American slate companies will not increase production yet", - Hansen told.

Nevertheless, according to the expert, prospects of demand for crude oil in 2018 leave no chance for OPEC and other extracting countries on increase in production and to provide to the oil market further support, they should extend the program validity which expires in March of the next year.

"In view of some decrease in the increased demand from oil refinery, we predict that as of the end of the year Brent oil will cost about 55 dollars for barrel. WTI crude oil will hardly rise higher than 51 dollars for barrel as its price pushes the American mining companies to increase production amounts. In 2018 a lot of things will depend on whether it will be possible to keep growth rates of demand. In view of our concerns connected with development of economy in the USA and China, rise in demand it can be insufficiently essential, and on this basis we are not ready to announce about the end of band trade which prevailed during 2017", - Hansen noted.

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