Last week, I was at the North American Prospect Expo or NAPE. It’s the annual meeting once a year in Houston in which deal makers from all over the country, even all over the world, get together to share prospects in the oil and gas business. My speech there was focused on our market outlook for 2018. In other words, what are commodity prices going to do over the course of this year and what do we expect them to do going into the following years.
A quick summary for you, our listeners today is this, we expect that the market is going to be relatively stable, in fact, specifically, we expect oil prices to hover right around $60, $61, $62 a barrel. At NAPE, I gave the range $58 to $66 a barrel as the range we expect oil prices to stay in for the majority of the year. Now, we will see prices go inside, up and down, out of that range but, I don’t expect any big trends in or out of that range. Once again, we expect the market to be stable.
In general, the market will be stable because supply and demand will match. At the end of last year, the market was under supplied by about 400,000 barrels a day, meaning the world was producing 400,000 barrels a day less than it needed. Going into this year, we know that additional crude oil supplies will come on line. A lot of it will come from right here in Texas and in the United States from the advancing shale plays but other places, like Canada, will also continue to produce additional oil as they expand their projects up in the [inaudible 00:01:47]. Over all, we expect the world to add around one and half up to 1.8 million barrels a day of crude oil production. However, we also expect the world to add increased demand.
Over the last three years, the world has averaged about 1.6 or 1.7 million barrels a day in additional oil demand every year and we expect that trend to continue this year. Yes, oil prices are higher but, also the world economy is growing at a pace right now that it hasn’t grown in nearly a decade. That new economic growth means new demand is going to come in to the market for energy and a lot of that will come in oil. With additional demand in oil, matching additional supplies can come into the market, we expect that the market will be just under supplied or just a little bit less oil being produced than it needs for most of the year, which will hold prices in and around the $60 a barrel range.
Looking into future years, 19, 20, 21, we actually expect that the market will be somewhat under supplied, in other words, it will be difficult for the market to supply enough to match global demand, meaning we think prices, in general, will go up. So, look for additional market outlooks from us as we go forward this year and the beginning of next year. If you ever want to get more detailed information, you can go to my website at Ryan Sitton dot com.
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Ryan Sitton is a native Texan who grew up in the Irving area. He is a graduate of Texas A&M University where he earned a degree in Mechanical Engineering. Ryan founded PinnacleAIS, an engineering and technology company focused on reliability and integrity programs for the oil, gas, and petrochemical industries. He was elected to the Railroad Commission in 2014 to a six-year term. You can read more about Ryan HERE.