Energy commodities outlook upbeat as price index seen averaging 97.4 in 2018

Analysts’ views on energy commodities prices for 2018 are upbeat on expectations of higher prices for crude oils in the long term to year-end 2018.

FocusEconomics, a Spain-based leading provider of economic analysis and forecast, in its November 2017 Commodities Outlook, said it sees the energy price index averaging 97.4 in Q4 2018, which would be above their last month’s estimate of 96.3 and would represent a 2.5 percent increase from the expected 95.0 in Q4 2017.

The revision, according to the FocusEconomics analysts, reflects higher forecasts for five commodities, including Brent and WTI crude oils. However, the price projections for natural gas and uranium were lowered and prices of the remaining two commodities were unchanged.

However, their forecast is against recent trend where Crude Oil Price Index current levels is at 86.78, down from 93.91 last month and down from 89.53 one year ago, representing a change of -7.59 percent from last month and -3.07 percent from one year ago.
The assumptions behind the forecast are the OPEC oil deal and strong global growth, which are expected to rebalance the oil market.

“The successful implementation of the OPEC oil deal and signs that the agreement will be extended beyond the March 2018 deadline are driving crude oil prices up. Moreover, strong global growth is helping to rebalance the oil market,” said the FocusEconomics analysts.

They noted that coking and thermal coals prices also rallied in October on factors in China, including stricter regulation and the closure of mines during the 19th National Congress of the Communist Party of China in October, which limited supply.

“Uranium prices rose strongly, partially reversing their slow-but-steady decline dating from 2011, when Japan decided to shut down its nuclear reactors,” they said, adding that prices recovered slightly and are expected to rise further next year, suggesting that the commodity could have finally turned the corner on the back of increasing demand from China and a reduction in output in key producer Kazakhstan.

Brent Crude oil prices have successfully consolidated above the $60-per-barrel mark in recent weeks amid positive news of supply constraints and buoyant demand.

Specifically On 3 November, Brent Crude oil prices traded at $62.3 per barrel, which was up 11.0 percent from the same day in October and became the highest prices since June 2015.

However as at date the price has remained above the $60 per barrel settling at $61.90.

On the other hand, WTI Crude Oil prices traded at $55.6 per barrel, which marked an over two-year high. The price was up 24.6% from the same day in November of last year. However as at date the price has marginally dropped to $55.34.

WTI Crude Oil prices are equally benefiting from the successful implementation of the OPEC-led oil cut deal, which is restraining global supply and pushing up prices, and robust global demand.

To this end, the benchmark price for global crude oil markets has since reached 12.8 percent higher on a year-to-date basis and was up 41.7 percent from the same day last year.

According to the Joint Ministerial Monitoring Committee of OPEC and non-OPEC countries, the compliance level in October was 120 percent, the highest it has been since the start of the agreement. Moreover, Russian and Saudi officials have recently backed the extension of the deal beyond March 2018. On the demand side, healthy macroeconomic figures for both emerging and developed economies are a positive backdrop for oil prices.