Oil to end year at $57 – Forecast

• Posted on February 16, 2017
• by Nana Kwesi Coomson
• Comment

ALL things being equal, fuel prices will not travel beyond 15 percent increase in 2017, some industry analysts anticipate.

This is largely due to a forecast that the price of oil will end the year at US$57.0 per barrel on the average compared to the February 9 front-month price of US$55.6 per barrel, according to BMI, a subsidiary of Fitch.

According to its forecast, Brent crude will end 2018 with US$60 per barrel while it will trade on the average of US$64.0, US$67.0 and US$70 per barrel respectively in 2018, 2019 and 2020 respectively.

However, Bloomberg is forecasting the commodity to end 2017, 2018, 2018 and 2020 at an average of US$56.0, US$61.5, US$62.5 and US$65.0 per barrel respectively.

BMI said “Our 2017 Brent outlook is broadly neutral, with a US$57.0 per barrel average forecast for the year. Agreed production cuts by OPEC and Russia are supporting prices, but heavy refinery maintenance, and production growth in Libya, Nigeria and the Permian will cap gains. Longer-term, slowing fuels consumption growth in EMs, growth in US shale and Saudi Arabia’s substantial spare capacity will weigh on the price recovery, with Brent averaging below USD70.0/bbl until the 2020s.”

On the short term outlook, it said “excluding any major shock to the market, we expect Brent to remain largely range bound over the coming months, between USD53.0-58.0/bbl. It is our view that the OPEC, non-OPEC deal to cut 1.8mn b/d of production will continue to put a floor under prices, but offers little upside risk to Brent. Secondary sources have yet to report on the deal.”

If one of the most important commodity remains within this projected trajectory alongside a stable exchange rate and lower inflation, then the Government of Ghana will be able to able to manage well the risk exposure of fuel to the economy. It will also make modest gains from sale of crude oil which sold on the average of about US$46 per barrel in 2016.

Ghana earned about US$1.4 billion from crude oil exports in 2016 compared with US$1.9 billion in December 2015.

Fuel prices went up between 8 and 11 percent last month with petrol and diesel, recording the biggest increment. A liter of petrol at some major Oil Marketing Companies is selling between GHc4 cedis and GHc4.5. However, the price of a liter of diesel is going for GHc4 cedis and GHc4.15.

Duncan Amoah, Executive Secretary of the Chamber of Petroleum Consumers, is hopeful the projection if it comes to pass will keep petroleum prices stable and possibly lower it if the special petroleum tax levy is removed. He wants to see a quick relieve to consumers since petroleum prices are very expensive in Ghana.

Crude oil is presently hovering around US$55 per barrel on the world market.  

By Augustine Amoah