Global oil markets are expected to tighten in the third quarter of 2017, before loosening through 2018.
That’s according to a new forecast from the US Energy Information Administration (EIA), which suggests due to an estimated six-month lag between oil prices changing and production reacting, higher crude oil prices in mid-2017 have the potential to raise US supply next year.
It suggests this will be compounded by OPEC non-compliance beginning to grow towards the end of this year and increasing in the second half of 2018, as cuts continue to be extended.
The EIA says OPEC’s crude oil production target will remain at 32.5 million barrels per day (b/d) through the end of the first quarter of 2018.
Given the extended production cuts, the organisation now forecasts OPEC members’ crude oil production to average 32.3 million b/d in 2017 and reach 32.8 million b/d in 2018.
The largest global inventory increase in the forecast occurs in the second quarter of 2018, when Brazilian and OPEC production are expected to increase by 570,000 b/d and 220,000 b/d respectively.
Supply growth in 2018 could contribute to downward pressure in oil prices as early as late 2017.
The report forecasts a 2017 average spot price for Brent crude oil of $53/barrel (£41.8), with prices increasing to $56/barrel (£44.2) in 2018.