Oil price seen struggling as US output undermines OPEC cuts

LONDON: Oil analysts have grown more unsure that the Organization of the Petroleum Exporting Countries’ (OPEC) supply cut will be enough to offset the increase in US production and do not believe prices will reach $60 a barrel until early next year, according to a Reuters poll on Friday.
Brent crude is expected to average $57.25 per barrel in 2017, slightly lower than last month’s forecast of $57.52, the poll of 32 economists and analysts showed.
Forecasts for Brent in 2017 range from a high of $73 by Raymond James to a low of $51 by Commerzbank.
Growing US supply is expected to partly offset cuts by OPEC and its partners, said Rahul Prithiani, director at CRISIL Research.
“If US producers keep on increasing output at the same pace then rebalancing in the oil markets is expected to get delayed beyond 2017,” he said.
US shale production is expected to rise by 109,000 barrels per day (bpd) to 4.96 million bpd in April, its biggest monthly increase since October, according to a US Energy Information Administration (EIA) report issued this month.
Analysts said OPEC’s first accord on supply curbs since 2008 could be challenged by poor adherence from participants outside the group, even as OPEC states have been broadly compliant.
OPEC oil output is likely to fall for a third straight month in March, a Reuters survey found on Wednesday, as the UAE made progress in trimming supplies.
Meanwhile, maintenance and unrest have hampered output from Nigeria and Libya, which are both exempt from the supply deal.
OPEC, which meets on May 25 in Vienna, pledged last year to reduce output by about 1.2 million bpd for the first half of 2017. Non-OPEC producers agreed to cut about half that amount.
Brent crude has fallen about 5 percent so far this month, the biggest percentage decline since July. Record high US stocks have led speculators to cut holdings of US crude oil futures and options to the lowest since December.
“The initial liquidation in net long positions is a concern; it reflects weaker market confidence in oil prices, amid rising US shale investment and production,” said Cailin Birch, an analyst at the Economist Intelligence Unit (EIU).
The risk of an even faster sell-off will be seen as a major risk by most oil-producing countries, providing further motivation for the OPEC deal to be extended, Birch added.
The Reuters survey forecast US WTI crude futures would average $55.29 a barrel in 2017, marginally lower than last month’s forecast of $55.66.

Oil prices
Oil prices fell on Friday after a three-day rally ran out of steam due to a stronger dollar, promising to notch up the oil market’s worst-performing quarter since 2015.
Brent crude futures have made the biggest losses across global asset classes this quarter.
Brent futures were down 53 cents at $52.43 a barrel at 1023 GMT. The contracts have lost around 7 percent since the previous quarter, the worst quarterly losses since late 2015.
US crude futures were down 36 cents at $49.99 a barrel, slipping back below $50. They too are on track to end the quarter around 7 percent lower, also the worst quarterly losses since late 2015.