Mubasher: The International Energy Agency’s (IEA) said that the weakening oil market fundamentals could delay the rebalancing of the oil market, oil supply glut might persist into 2017 as a result.
The price of Brent crude oil fell by almost 5% in the two days following the release of the IEA's report.US crude oil production also fell by more than 1.1 million barrel per day (pbd) since it peaked in April 2015.
Production in Kuwait and the UAE hit their highest levels ever; Saudi Arabia’s output is near a record high; Iraqi production continues to grow; and Iran has reached a post-sanctions peak.
However, OPEC’s new agreement, announced on 28 September, to limit production to a range between 32.5 and 33.0 million pbd buoyed markets. As a result, the Brent crude oil price has crossed the $50 per barrel (pb) barrier and is currently up by more than 10% since the deal was announced.
QNB Economics believes that the two news offset each other, and the market rebalancing will continue to progress. Therefore, the Qatari bank maintained its forecasts that oil prices will average $45 pb in 2016, before rising to $55 pb in 2017 and $58 pb in 2018.
Oil prices are expected to average $55 pb in 2017 and to continue converging towards $60 pb over the medium term.
