Oil due for a 'sharp correction' in 2018 - Barclays
|CNBC reports the commentary from Michael D. Cohen, head of energy commodities research, Barclays, arguing that oil prices risk a ‘sharp correction’ in 2018.
Key Quotes:
“On the supply side, OPEC compliance is high and Venezuela's production keeps slipping significantly month to month. Other countries including Iraq, Nigeria, and Libya could see disruptions in the coming year.
Outages in the North Sea and hurricanes have unexpectedly tightened the market in the past six months, supporting OPEC's longstanding efforts since 2014 to rebalance it.
These fundamental factors and OPEC countries' willingness to keep their production in check have reduced excess inventories by half as the New Year arrives.
As a result, investors are positioned for a bull rally, leaving the oil market susceptible to a sharp correction should the fundamentals disappoint.
That is one of several reasons why we are retaining our bearish stance for next year, and we expect Brent prices to average $55 per barrel.
So the New Year's resolutions are clear: U.S. producers are pledging to tighten their belts, and OPEC plans to keep reducing the inventory excess.
But the recent higher price environment makes achieving these resolutions more difficult and sets the market up for a tumultuous year.”
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