Brent may hit $57 if Opec extends output cuts

16/04/2017 08:03 AST

Brent crude may average $57 for a barrel this year, if a six-month extension of Opec production cut is realised, said a report citing Samba Financial Group.

Next year, Brent crude may average higher – $62, reported Gulf Times.

“The timing of a market rebalancing will depend heavily on developments in US shale oil, and on whether global decline rates in existing fields are offset by new investment,” Samba noted.

In the short-term, there is a pipeline of existing projects that will go some way to cover depletion rates, but the slump in investment during 2014-16 will start to impact further down the line, it stated.

According to Samba, the prices could get volatile in response to movements in stock levels, said the report.

Prices have been trading in a narrow band around $55 for Brent since the start of the year, it stated.

The average for the year to date stands at $56, a healthy increase on the $47 annual average for 2016, but clearly a long way from earlier $100 levels, said the report.

While the physical markets, and particularly stock levels, are taking time to adjust, investors appear confident that Opec cuts will bring about a price enhancing rebalancing.

Long positioning in oil futures reached record-highs in mid-February, with money managers now reportedly holding around 1bn barrels of financial crude contracts, it added.


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