Oil analysts have cut their price forecasts for the first time since February, as the prospect of the world’s largest producers agreeing to freeze output dims and US production shows signs of gradually picking up.
After five consecutive months of upward revisions, the 34 analysts and economists polled by Reuters forecast Brent would average $45.44 a barrel in 2016, slightly lower than last month’s forecast of $45.51.
The North Sea benchmark has averaged $42.59 so far this year, having ricocheted from a near-13-year low of $27.10 in January to an eight-month high of $52.86 in June this year.
Oil’s weakness over the last two years has eroded the budgets of even wealthy producers such as Saudi Arabia or Qatar and forced companies around the world to cut thousands of jobs.
With the price struggling to hold above $50 a barrel, there are still questions hanging over global economic growth.
Of the 28 respondents who participated in both the August and July surveys, eight lowered their 2016 forecasts for Brent, while 16 kept them unchanged.
An informal meeting between members of Organization of the Petroleum Exporting Countries and non-OPEC nations in September was unlikely to result in a meaningful agreement to limit production, analysts said.
“A decision (to freeze output) would be no more than lip service, as Russia and Saudi Arabia are producing near their capacity limit. So this speculation will vanish into thin air, soon — and prices will come down again,” said Frank Schallenberger, head of commodities research at Stuttgart-based Landesbank Baden-Wuerttemberg.
The rise in the number of drilling rigs in the United States over the last three months could also exacerbate a persistent supply overhang, denting prospects of a rebalancing in oil markets, analysts noted.
US crude production will increase, but will likely fall short of the levels seen between 2011 and 2014, ABN AMRO senior energy economist Hans Van Cleef said.
“Higher US crude production will cap the upside of oil price recovery,” he said.
Attacks on oil facilities in Nigeria, civil war in Libya and economic and political crisis in Venezuela have curtailed output, but should these risks abate, returning supply could also put pressure on prices.
“If the political situation (in Nigeria) eases and output returns sooner than expected that could cause prices to fall sharply,” Capital Economics commodities analyst Thomas Pugh said, adding that expectations of output returning in Libya poses an additional risk.
Goldman Sachs said there was a likelihood of recovery from supply disruptions in Nigeria, Iraq and Libya in the second half of this year that could tilt the oil market back into surplus.
The survey forecast US light crude will average $43.96 a barrel in 2016, compared with an average so far this year of around $41 per barrel.
JBC Energy had the lowest 2016 forecast for Brent at $41.99 a barrel, while ANZ had the highest at $55.

Source: Arab News