The end of 2017 was clearly positive for oil-exporting nations. For example, Brent oil futures traded at 66,60 dollars per barrels on December 29th. Will the existing bullish trend persist in 2018?
If to take into account the forecasts made by a number of international oil experts, we can expect short-term rallies up to 80 dollars per barrel. However, the oil market has been really volatile and is probably going to be. This means that we may also see major retracements further down the road.
The thing is that the market is indeed sensitive to external factors, which was confirmed by the
market behavior seen over the last trading week of 2017. The rally to 67 dollars per barrel was mainly caused by the explosion of an oil pipeline in Libya, which reduced the daily oil export by 70-100K barrels. There was another factor contributing to the price rally. The thing is that the U.S. crude oil inventories report indicated a major drop in oil production and inventories.
According to Yaroslav Lisovolik, Chief Economist for the Eurasian Development Bank, is now heavily dependent on the oil supply coming from the United States. However, even the American shale oil is not capable of making up for the growing geopolitical risks we all can see these days.
Some other experts, such as A. Golubovich and A. Orlov from Arbat Capital, think that the key geopolitical risks are related to Donald Trump's possible decision to punish Iran and put those anti-Iranian sanctions back or even to sic Saudi Arabia on Iran's satellites in the region. If the latter is the case, most of the oil export from the Persian Gulf may well be disrupted, which will probably push the prices higher to 80 barrels a day. However, on the other hand, this may trigger a major retracement to 45 dollars per barrel further down the road, maybe next year.
At the same time, of the participants of the OPEC+ deal change the plan and suspend the deal prematurely, somewhere in mid-2018, this is definitely going to make the market really nervous. Also, a record-high amount of long positions for crude oil, which may later make the prices retrace by 5-10 dollars per barrel alter on.
