Despite the fact that American oil producers have become more active, the average price of Brent oil has all chances to reach 65 dollars per barrel in the last quarter of 2017, Citigroup experts predict.
According to the experts, the recent OPEC deal (aimed at reducing oil production and supported by several non-OPEC producers) may well be extended and therefore may become the very factor backing oil prices despite the increasing shale oil production in the United States.
Citigroup experts believe that there is nothing surprising about this since chances are we are going to see a decrease in oil inventories of the OPEC deal is extended, even despite higher production in the USA. Decreasing inventories usually push prices higher for fear of creating a deficit. In the second half of the year, the prices should already exceed the $60/b threshold, they believe.
As for the average price of WTI oil, it may reach $62/b over the same period. This means the prices may gain another $10/b in the near future if the necessary conditions set in. However, if the OPEC deal is not extended, we are likely to see an instant price drop following the decision. The thing is that in late 2016, both OPEC and non-OPEC producers already showed the world how fast they managed to increase their production, and this is something that raises concerns in the global market of crude oil.
The Russian government already gave us to understand that the actual results of the deal turned out to be less considerable than expected, and this is another reason why we may see no further deal. In case you don’t know, the deal took effect in early 2017 but the price hasn’t gone above $58/b since then. This was a short-term increase on January 3. At the same time, Russia had expected the average price around 55-60 dollars per barrel. Most of the time, the price has been below $55/b. At this point, it’s between 51 and 52 dollars per barrel for Brent oil. WTI is even below the $50/b threshold.
So, now we can see that the OPEC deal has improved the situation in the oil market just a little bit. Still, it’s too early to predict whether they are actually going to extend the deal.
