KUALA LUMPUR: Crude oil price is expected to breach US$100 a barrel by the year-end before plunging to around US$60 a barrel, according to IHS Markit oil markets and downstream vice president Victor Shum.
Shum said oil price should gradually hit between US$75 and US$85 a barrel before experiencing a sharp jump to US$100.
He, however, said it would then drop to US$60 a barrel by the end of 2019 or early 2020, on geopolitical risks and the Iranian sanction.
“We expect the average Brent price to chart about US$78 a barrel in the second half of this year and quite likely there will be some volatility and it will hover around US$75 too US$85 a barrel.
“With the unpredictable US President Donald Trump administration, we could envision a scenario where the oil price could hit US$100 a barrel and with the Iranian and Venezuelan output significantly reduced and no spare production capacity left from major Arab producers,” he said.
Shum added that the oil markets would be on edge and any unexpected disruptions would cause a very tight situation.
“Under those circumstances, oil prices may hit US$100 a barrel and beyond,” he said at a press conference after the opening of the Asia Petrochemical Industry Conference 2018 yesterday.
Shum said the industry was entering a new situation in the oil markets where the spare market capacity becomes an indicator of oil price directions as well as geopolitical issues.
“We can expect a major disruption of Iranian oil production with less crude supply from Iran and we may face a tighter crude oil market due to shrinking spare production capacity by the end of this year.
“The Trump administration’s efforts to change the rules of the global game in trade, security and alliances will create a wide spectrum of potential oil price paths. Prospects for world oil demand growth remain bright for now – but trade wars and higher oil prices are big downside risks,” he added.
Another interesting development to keep watch will be US’ presidential election in the next two years, which Shum said would determine a change of economic policies and geopolitical risks reduced depending on the outcome of the election.
On August 16, the head of the new Iran Action Group, Brian Hook announced that the US would sanction any country that purchased oil from Iran after the November 4 deadline.
China has shown no indication that it plans to cooperate with the US, and Hook did not rule out imposing secondary sanctions on China if it continues its purchases of Iranian oil.
While other importers of Iranian crude, including Japan and South Korea, had scaled back their purchases, China has actually increased its imports from Iran, causing further volatility in the oil market.