Analysts have raised their expectations on the future of crude oil prices as inventories fall and geopolitical risk to global supply rises. The global benchmark more commonly known as the Brent crude is expected to average $63 per barrel in 2018. The U.S. standard indicator, West Texas Intermediate is set to close around $59 per barrel by the end of the year. The average growth expectations have been slowly increasing every month as 2018 is in full throttle.
According to the past crude oil movements, crude prices could plateau before falling again. This will give investors a great opportunity to upgrade their decisions and sell at the right time. Looking back, crude oil prices have risen above $70 per barrel before falling back on rumors of burgeoning U.S. shale oil production. More recently, crude oil prices have sparked again due to declining crude stocks outside of the U.S. and rising tensions between Iran and the United States.
As President Trump continues to guide his team towards a more hawkish viewpoint, analysts predict the administration to withdraw from the international agreement to curb Iran’s nuclear program. This could trigger a re-imposition of past economic sanctions on the Islamic Republic, which could interfere with the country’s oil exports and reduce the total world supply of crude oil. As inventory and supply falls, the price will skyrocket up and become more sensitive to geopolitical risk factors once again.
The Organization of the Petroleum Exporting Countries (OPEC) has also shown support in crude oil prices and its commitment to crude oil production cuts. This agreement is set to expire by the end of 2018, but Saudi Arabia has suggested working alongside Russia and other major oil producers to curb production into 2019. The crude oil market will continue to have higher expectations until rumors of potential output increases emerge.