Could crude oil go even higher by the end of 2018?

OPEC does not officially set a target price for crude, but reportedly in February last year its biggest producer, Saudi Arabia, was aiming for a $60 barrel. At its November meeting, the cartel agreed to extend its production ceiling to the end of 2018.

OPEC members have a poor track record of sticking to agreed quotas, but they kept within 95% of the required cuts, with Saudi Arabia cutting further, meaning the aggregate production cut held.

Graham-Wood notes that demand for oil in the second half of the year usually climbs. However, supply had curtailed due to production problems in Venezuela and in South Dakota in the US, as well as pipeline issues in Libya and the Forties Oil Field in the North Sea.

Factors affecting oil price outlook

OPEC meets again on 20 June 2018, and if crude is still at $60 then Graham-Wood thinks a $75 year-end may be a realistic possibility.

Up-and-coming geopolitical issues that may affect oil price could include elections in Iraq, and presidential elections in Nigeria and in Russia. Graham-Wood also expects problems to persist in Venezuela, which sits on the world’s largest proven reserves of oil.

Street protests in Iran have been one of the factors supporting the oil price at the start of 2018. But if the authorities seek to alleviate tensions through increased public spending, as some have suggested, they might need to fund this by opening their spigots and abandoning their OPEC quota. Graham-Wood suggests such a quota breach could see the oil price drop to $40 a barrel, but he feels that, as long as the Saudi-Russian relationship sticks, OPEC will see the revenue benefits of adhering to the output targets.