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Editorial comment

It’s not unusual for opinion to be divided as to where the oil price is going to go next, but perhaps what is unusual are the extremes to which analysts are now pointing.

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On the bearish side, you have Ed Morse, Managing Director and Global Head of Commodities at Citigroup predicting that 2019 will see prices drop back to the US$45/bbl region.1 Meanwhile, on the bullish side, you have Phillip K. Verleger, senior adviser to the Brattle Group and commodities adviser the US Congress suggesting that prices could surge to US$400 and precipitate a global economic collapse.2

As always, it’s impossible to know for certain if either of these predictions will stand the test of time, but there are arguments in favour of both.

Some of the factors that could push prices down include: rising US output from the shale industry, rising Saudi and OPEC output (as they roll back over-compliance on production cuts), a burgeoning trade war between the US and China, a resurgent Brazilian oil industry, and a resumption of Libyan exports.3

Factors that could push prices up include: an impending shortage of low-sulfur diesel fuel (caused by new, stricter regulations on shipping and commercial transport), and increasingly bellicose language between Iran and the US in the wake of new sanctions on Iranian oil exports. Disagreements between the two nations are, to put it mildly, not uncommon, but relations have taken a notable dive in recent months. Back in July, Iran threatened to block the Strait of Hormuz (potentially interfering with 20% of global oil exports), and Iranian President Hassan Rouhani was quoted as saying “American [sic] must understand well that peace with Iran is the mother of all peace and war with Iran is the mother of all wars.”4 Donald Trump, President of the United States, chose to respond via Twitter: “To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!”5 In short, relations are somewhat strained.

Despite the uncertainty stemming from global events, there is good news from the US; the shale industry continues to grow from strength to strength, with production growth hitting record levels. The picture is looking so good that the International Energy Agency has claimed that “the shale sector as a whole is on track to achieve, for the first time in its history, positive free cash flow in 2018.”6 This is a significant achievement considering the difficulties faced by the upstream industry over recent years, and one that wouldn’t have been possible without the determination to adapt and meet the challenges of a changing world.


1. ‘The bulls are wrong — here’s why oil could plummet to $45: Citi’s top oil forecaster’ –
2. ‘Expert makes the case for $400 per barrel oil’ –
3. ‘U.S. Crude Oil Production And Exports Soar To Record Highs’ –
4. ‘Iran ‘mother of all peace,’ ‘all wars,’ leader warns Trump’ –
5. Twitter post, 23 July, 2018 –
6. ‘Investment Analysis: The journey of US light tight oil production towards a financially sustainable business’ –

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