The Case for $80 Oil in 2018......

During the past few months, oil prices have been grinding higher and higher, which is spurring some forecasters to predict oil could hit $80 a barrel by the end of 2018. A number of factors have combined to positively impact oil prices including OPEC and Non-OPEC production cuts, declining production from Venezuela, a weakening US dollar and US shale production loosing a bit of steam. Undoubtedly, the largest contributing factor to oil's recent rise has been OPEC and Non-OPEC nations maintaining their production cuts through 2018. The greater impetus by Saudi Arabia (the largest OPEC producer) to maintain higher oil prices ahead of the widely-anticipated initial public offering of Saudi Aramco should support oil prices through 2018. Further, mix in the potential for geopolitical crises around the world and oil prices could very easily move into the $70 to $80 range. For example, a re-imposing of U.S. sanctions on Iran, the third-biggest OPEC producer, is likely to dislocate at least 500,000 barrels of the Middle Eastern nation's oil exports. Any supply disruptions in Iraq, Libya, Nigeria and Venezuela could see global oil supply drop by more than 3 million bbl/d in 2018. Overall, with global supplies already so tight, any unexpected disruption could cause prices to surge.

Recall, oil prices last hit $80 per barrel in November 2014. Both WTI and Brent collapsed from above $100 per barrel in June 2014 to around $30 a barrel in January 2016 due to weak demand, a strong US dollar and booming U.S. shale production. Considering all of the factors that are positively impacting oil prices today, 2018 might finally be the year for the return of commodities.