Brent: Risks to the USD 56-57/b price consensus are firmly on the upside - HSBC

In its latest note on oil markets, the analysts at HSBC offer their 2018 outlook on oil, suggesting that considerable risks persist to the upside.

Key Quotes:

“In recent weeks, public statements from OPEC members and others in the agreement (such as Russia) point to a likelihood that the cuts will be extended beyond the current end-1Q expiry when the organization meets on 30 November.

However, there is a growing market consensus that this will happen, which may leave downside risks to prices if nothing substantial materializes.

We forecast 2018 global demand growth of 1.2mbd but non-OPEC and OPEC NGL growth of 1.0mbd, virtually all of US tight oil.

Need for continued OPEC restraint to prevent a return to inventory builds in the early months of next year.

Our supply/demand balance points to the need for sustained long-term growth in US tight oil supply - beyond just 2018 - in order to fill a looming supply gap as conventional non-OPEC output starts to decline in the next few years.

Our 2018 assumption remains at the top of the consensus range. While there are considerable risks to prices in the coming year, we believe strongly that risks to the USD56-57/b Brent price consensus are firmly on the upside. Any extension of the OPEC cuts through 2018 would reinforce this view.”