S&P Global rating raised its Brent oil price forecast by 10 per cent to $55 per barrel for 2018, amid expectations of growing crude oil demand and that Opec and other producers will continue to cut production beyond March.
“We believe the price increases reflect ongoing Opec production cuts, supply disruptions, and temporary production declines as well as positive market sentiment about demand,” the ratings agency said in a statement on Tuesday.
"The EIA, International Energy Agency (IEA), and others have recently indicated robust global oil demand growth in 2018 at 1.3 per cent or above. We see this supported by positive economic growth momentum in both advanced and emerging economies."
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The price of oil has rebounded over the past year after Opec and other producers moved to reduce supply late last year in the aftermath of the 2014 crash.
Opec, non-member Russia and nine other producers agreed to curb oil output by about 1.8 million barrels per day until March 2018. They are expected to extend the deal at a November 30 meeting in Vienna.
After dropping as low as $27.88 per barrel in early 2016, Brent crude futures have subsequently recovered ground, trading at over $60 per barrel since late October.
The price of Brent futures will remain above $60 a barrel until November 2018, the agency noted.
S&P said it expected the 1.8 million barrel per day cut by Opec and other oil producing countries to remain in place next year. While there is a risk that not all those who had signed up for the cuts would comply, so far compliance has been consistent, the rating agency noted.
Opec is expected to agree to an extension in production cuts by up to nine-months at its meeting in Vienna this Thursday.
The ratings agency is maintaining its forecast for West Texas Intermediate (WTI) for next year at $50 a barrel, with additional transportation costs and some capacity constraints keeping prices below that of Brent. However, the difference in pricing between the two benchmarks is likely to narrow in coming quarters, with an average price of $55 per barrel forecast for both Brent and WTI in 2019 and 2020.