Dubai’s largest bank Emirates NBD has offered a cautious forecast for oil prices in 2018, stating that it expects the global benchmark Brent crude to average $56 a barrel this year.

That is contrary to the bullish sentiment many global banks and financial institutions have recently expressed for oil prices in the coming year, coupled with crude oil prices touching the $70 mark last month for the first time in three years.

A number of factors, primary of those being rising shale oil production in the US, will exert pressure on the trajectory of crude prices this year, Tariq Bin Hendi, Emirates NBD’s acting chief investment officer, said while presenting the Dubai Government-owned bank’s investment outlook for 2018.

“Our house view on oil is that there will be some pressures, especially from shale oil (production in the US), and we see prices stabilising around $56 a barrel mark. It will all depend on what happens in the next two quarters though,” Bin Hendi told MEED.

The Organization of Petroleum Exporting Countries (Opec) members have recorded strong compliance rates with a group of 11 other oil producers, led by Russia, by adhering to their commitment since the fourth quarter of 2017 to reduce output by 1.8 million barrels a day (b/d). The agreement has been largely credited for oil prices breaching the $70 a barrel threshold in 2018, the first time prices have increased beyond that mark since December 2014.

However, despite a resurgence of oil prices in the early part of the year, rising output from US shale producers is beginning to put pressure on crude oil prices.

“You are seeing the impact of shale oil and gas. Shale production is just ramping up,” Bin Hendi said.

He however added that “the political situation has stabilised to some extent” with respect to oil prices, and that “Opec is going to try and manage supply.”

Irrespective of how oil performs this year, Emirates NBD stands to gain from either scenarios, Ben Hendi said. While low oil prices will fetch benefits for emerging economies and major consumer nations like India, strong crude prices will boost GCC economies, and particularly Saudi Arabia – two key markets the Dubai Financial Market-listed bank is keenly eyeing for investment opportunities.