Global oil prices to stay high, averaging $70 per barrel for the rest of 2018

Global oil prices will remain around $70 per barrel on the average, one of the world’s leading rating agencies, Fitch Ratings, said on Wednesday in its medium term crude price forecast seen by businessamlive.com

The agency said the prices of the black gold will likely remain relatively high for the rest of 2018 and 2019 due to ongoing geopolitical tensions and strong demand, despite indications that allies, Saudi Arabia and Russia might increase production.

It had earlier assumed that Brent would average $57.5 per barrel, but has now revised this to $70 per barrel and $65 per barrel in 2018 and 2019 respectively.

“The revision was made to reflect high year-to-date prices, Venezuela’s production decline, continued geopolitical tensions, including the renewal of US oil sanctions on Iran, and strong demand growth,” Fitch said.

It added that output increases from Saudi Arabia and Russia, two main driving forces behind the OPEC agreement, should help offset the production declines in Venezuela and a possible drop in exports from Iran after the renewed US sanctions come into force later this year.

However, it stated that production increases from these countries would be gradual and coordinated to avoid the market shifting into a massive surplus.

For the long-term, “price assumptions, including for 2020, remained unchanged at $57.5 per barrel for Brent which reflects our view that the US shale industry should remain a marginal oil producer and should be able to meet a significant portion of global demand growth for the next several years,” the agency further said.

It also noted that despite per barrel full-cycle costs remaining unchanged so far, a lot will depend on whether crude producers would be able to preserve efficiency gains achieved so far as oil prices remain high.