Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Oil’s rout is over, hail the return of $100 crude! Maybe

Oil news

After three years of gloom, the number 100 is finally starting to resurface in the forecasts of market analysts.

A slump in new production outside the U.S. shale patch in 2019 could help to send Brent crude briefly back above $100 a barrel next year, according to London-based consultancy Energy Aspects.

The International Energy Agency also has a 100 number in its latest outlook, published Friday. While it doesn’t forecast prices and doesn’t yet look as far ahead as 2019, it sees global demand exceeding 100 million barrels a day for the first time in the fourth quarter of this year.

Oil’s slump is over — hail the return of triple-digit crude! Well, maybe, briefly.

OPEC ministers and friends meeting in Doha today to assess their output deal would be wise not to get too carried away.

The IEA, as I noted last week, is much less bullish about demand growth in the coming months than other pundits. For some, this raises the risk that the world’s most-watched forecast significantly underestimates oil use and, as a result, the speed of oil market rebalancing and the upward pressure on prices.

Broad-based economic recovery is setting the world up for demand growth of 1.7 million barrels a day in 2018, and there’s a chance that it could be as high as 2 million barrels, according to Energy Aspects. Certainly there’s a lot of expansion about — the World Bank has raised its global GDP growth forecast for this year to 3.1 percent from the 2.9 percent it projected in June. With strong economic momentum in almost every country and region, there is “no real drag on oil demand growth,” Energy Aspects said Jan. 15.

But there could be one in the works. Rising prices can have a chilling effect on demand growth, and benchmark crude prices have risen more than 55 percent since their rally started in June. End-user retail prices are feeling this.

U.S. gasoline and diesel are both the most expensive they have been at this time of year since 2014 and, in contrast to the normal seasonal pattern, pump prices are already rising. The same is true in Europe.

Strong demand growth in the developed countries of North America and Europe in the first half of 2017 was “largely attributable to lower prices,” the IEA says. Drivers are unlikely to benefit from similar price moves this year.

What happens to car owners in rich nations isn’t the only source of strain on demand. Many developing countries took the opportunity of the sharp fall in prices to reduce subsidies on oil products, which could amplify the impact of higher crude on what end users pay.

And some less-developed countries are shifting to natural gas from oil. The IEA sees 540,000 barrels a day of demand for gasoil, fuel oil and crude displaced by gas in five non-OECD countries since 2014. Saudi Arabia has also cut its direct crude use for power generation by around 100,000 barrels a day in the past two years. The displacement theme will continue this year.

The draw on global stockpiles should resume in the second quarter, even amid rising OPEC output, according to Energy Aspects.

The IEA also sees a big rise in oil production this year, including “explosive growth” in the U.S. With the pickup in non-OPEC supply exceeding the increase in demand, it sees the world’s need for OPEC production falling by around 600,000 barrels a day compared with last year, to a level below last month’s output. The implication of that for prices is clear — if the IEA is right, the possibility that oil reaches $100 a barrel is remote.

Higher prices may yet clip the wings of the oil demand growth that OPEC and friends need. They should not let the sweet smell of the success they have had so far go to their heads in Doha.

Recommended for you

More from Energy Voice

Latest Posts