The 2018 outlook for oil prices

The IEA and OPEC, two of the biggest voices in the oil markets, are diverging on the outlook for oil in 2018.

Both are pondering over whether the US shale industry will fill the void left by OPEC’s supply cuts and derail the cartel’s efforts to rebalance the oil market.

There is one thing that the two agree on: the cuts are working, where they divide is what happens next.

OPEC forecasts suggest that the excess inventories that have depressed the oil market for the past three years, will be eradicated by the production curbs.

Conversely, the IEA predicts that the supply glut will barely move.

One of the most pressing issues is whether OPEC are simply forfeiting market share for an elusive goal. As OPEC-led cuts as US shale producers are eager to seep in to fill the void with their supplies.

Federal Reserve polices may also affect the direction of oil prices. The dollar had an inverse relationship with the price of oil. With three rate increases predicted to come next year, we could see the dollar rise, causing oil to push down.

Option traders are suggesting that Brent oil will rebound to $80 per barrel in 2018, making it the best year in decades.

After a tumultuous week for oil prices, Brent oil is coming back to levels seen at the beginning of the week, trading at $63.35 per barrel. An injection of volatility in oil markets came after news that the North Sea pipeline would close for repairs. This jolted markets, sending prices higher. On Tuesday, prices were once again supported by the temporary shutdown of the Forties pipeline in the UK. The pause in production sent Brent oil to $65 per barrel for the first time since mid-July 2015.