FocusEconomics, a Spain-based economic think tank, says after surveying economists and analysts: “We do not expect the current sweet spot in oil prices will be sustainable further down the road. Higher prices are allowing an increasing number of shale oil producers to ramp up production, especially in the United States. More, rising trade disputes and elevated political tensions across the globe are threatening to derail an otherwise promising global growth trajectory. Prices could be averaging $66.5 a barrel in Q4 (October to December) of 2018.”
Brent oil has averaged $69.37 a barrel since January.
The think tank’s economists forecast a range for Q4 of $57-81.7.
Natixis, a London-based commodity research house, says: “Due to sanctions, Iran’s 2.5-300,000 barrels a day of export will not happen, which Opec (the petro exporting nations' cartel) members are likely to replace.”
Opec is meeting next month to review its earlier production cut.
According to Natixis, “Data analysis of forex reserves and the fiscal situation of oil producing countries suggest they still require higher prices to narrow (their) fiscal deficits; it is therefore highly likely that Opec (and other producers which joined their output reduction) in their meeting in June will agree to continue production cuts.”
The FocusEconomics poll also projects overall commodity prices to rise five per cent in Q4 from the same period in 2017, mainly due to higher energy and agricultural prices. This is the third year in a row when commodity prices are booming.
Prices for base metals stabilised after a sharp up-move last month due to a potential trade war between the US and China. “Prices will continue to recover toward the end of the year as strong global growth, especially in China, will shore up demand for industrial metals,” their survey said.
Analysts foresee base metal prices rising 2.4 per cent in Q4 from the same quarter in 2017.
On agricultural prices, it forecasts an 18.5 per cent annual increase in Q4.