Oil prices fell on Wednesday after reaching its 2 ½ year highs during previous sessions. The prices took a downward turn after Forties Pipelines resumed oil supplies despite a major disruption in Libya.
But the two major outages have exposed the tightening supply situation in the recent months, as OPEC and Russia led efforts to cap output have yielded great benefits for oil prices during 2017.
At 0210 GMT U.S. West Texas Intermediate (WTI) crude futures were at $59.74 a barrel, down 23 cents from their last settlement. WTI broke through $60 a barrel for the first time since June 2015 in the previous session.
Brent crude futures were at $66.66 a barrel, down 36 cents. Brent broke through $67 for the first time since May 2015 the previous day
Regarding the future of oil prices in the year 2018, one of the world’s largest Investment Banks, Goldman Sachs (GS) has been repeatedly bullish on the state of oil market in the next year. GS expected the global markets to clear the overhang by the middle of 2018, accelerating the exit of OPEC from the Production Cuts deal.
Oil re-balancing was stronger in the year 2018, thanks to many factors which include stellar global demand amid tightening supply. Backwardation, a sign of a tighter oil market, was one of OPEC’s goals in the production cut deal.
But the disruptions highlight the fact that markets have tightened significantly a year into voluntary supply restraint led by top producer Russia and the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC). Data from the U.S. Energy Information Administration (EIA) shows that following rampant oversupply in 2015, global oil markets gradually came into balance by 2016 and started to show a slight supply deficit this year, resulting in a reduction of global fuel inventories. EIA data implies a slight supply shortfall of 180,000 bpd for the first quarter of 2018.