Leading investment bank Goldman Sachs has just raised its oil price forecasts for 2018: on the back of cuts in international production, rising consumer demand and lagging response to that demand by American drillers, Brent Crude will top $80 later this year. The international oil benchmark, according to Goldman, will reach the $75 level by May, and over $82 by year-end.
Goldman Sachs Not Alone in Its Predictions
While Goldman’s predictions are the most optimistic, a number of other Wall Street investment banks have expressed faith in the ability of the oil markets to maintain healthy price levels. J.P. Morgan has forecast $78 by July, for example. With prices touching $71 at the end of January, these predictions currently do not seem far out of reach.
There Will Be Corrections
Goldman doesn’t see oil prices go higher and higher over the long term. By 2020, a number of major events are expected to change the way the oil markets work. The production cuts that Russia and OPEC members have agreed on keep close to 2 million bpd off the market at this point; that agreement will expire soon. As oil supplies climb, Goldman sees prices dropping back to $60, all as part of the “new oil order,” as some experts like to call it.
Nevertheless, prices will remain stable at that level. With oil demand rising to 1.86 million bpd by the end of 2018, prices cannot fall very far.
Efficiency & Discipline
American drillers have time and again expressed their concern about raising production at the expense of efficiency. According to Sigma Drilling Technologies, a major supplier of high-tech pulsation control solutions for drilling operators, focusing on dampener maintenance and other cost-effective tasks can offer long-term competitiveness. It’s an area that American oil drilling companies are beginning to focus on.
To request a free demonstration of Sigma products, call (281) 656-9298.
