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Last Updated : Jan 04, 2018 04:19 PM IST | Source: CNBC-TV18

Seeing broad-based strength in crude demand globally: Energy Aspects

In an interview to CNBC-TV18, Virendra Chauhan, Oil Analyst at Energy Aspects shared his views and readings on crude.

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Oil prices extended gains, heading towards USD 68 dollar a barrel - levels last seen in late 2014- 2015.

In an interview to CNBC-TV18, Virendra Chauhan, Oil Analyst at Energy Aspects shared his views and readings on crude.

Chauhan said we expect Brent crude to rise to USD 70 per bbl in 2018.

He further said that global inventory of crude continues to come down.

We are seeing broad-based strength in crude demand globally, he added.

Below is the verbatim transcript of the interview.

Sonia: Brent crude prices have risen almost 35 percent in the last six months. Of course, coordinated Organization of the Petroleum Exporting Countries (OPEC) production cuts has helped tighten supply, but do you get a sense that we could see further hikes in oil prices through the course of 2018?

A: Over the course of 2018, we certainly do expect prices to move into USD 70s per barrel and reach a firmer ground. If you look at what global inventories have done over the course of the last 6-9 months, they have been on a sustained downward trend and we think that is what is going to drive the oil price higher.

Latha: One was expecting that as the two pipelines in Libya in North Sea get repaired, things will mellow. But even after the restoration of the pipeline in the North Sea, we are continuing to see crude climb. So is USD 70 per barrel around the corner like this week or this month?

A: Potentially, but you have to remember in general Q1 and Q2 are softer periods for global oil demands at least relative to the second half of the year. So we would not expect, if there was going to be a trot in the oil price, we would expect it to be late Q1-Q2 but certainly in the second half of the year, we would expect prices to be firmly above USD 70 per barrel.

Latha: But for the moment, for January, what would your range be and what would the average be?

A: Around where we are at the moment, between USD 65 and USD 70, I would say it is a fair range for January.

Sonia: A two part question for you, one do you expect the OPEC to continue with its production cuts and two, there is an expectation that a stronger output growth from the US shale sector could cap the rise in crude. Would you concur with that?

A: Yes, that seems to be the key view at the moment, but if you look at the statistics which were just released at the end of December, you had great net growth on the US and that was for October. Drilling activity actually picked up in November and December and yet oil prices have continued to climb. Critically, what has also happened is that inventories at the global level have also continued to come down which suggested that US shale growth is currently being absorbed by the market and that is because a broad based strength in demand.

Latha: So even if shale comes in, you are expecting this upward pressure because of demand. If I were to ask you for a range for the first quarter, what would it be? Would it still be USD 65-70 per barrel?

A: Yes, I think it could potentially be a little bit wider but certainly, in Q2, we think prices typically drop just on seasonal trends by around 10 percent. So you could lose USD 5-6 in the second quarter. But then we expect that to be regained and then pick up in the second half of the year.
First Published on Jan 4, 2018 08:39 am
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