JP Morgan revises 2017 forecast for crude prices

By Azernews

By Nigar Abbasova

The U.S. JP Morgan bank has revised the forecasts for oil prices upon OPEC’s historic agreement to cut production in conjunction with non?OPEC countries.

The 2017 price forecasts were revised up to $58.25 per barrel on Brent and $56.25 per barrel on West Texas Intermediate (WTI), JP Morgan said in its report obtained by Trend.

“Price forecast increases are concentrated in 1Q17-3Q17, where we increase forecasts by an average of $5 per barrel,” said the report. “However, we now harbor mounting concerns that cheating will inevitably undermine commitment to the agreement at some point in 2H17. We therefore lower our 4Q17 price forecast to $55 per barrel and end-year forecast to $53 per barrel on Brent.”

JP Morgan analysts believe that there remains a degree of uncertainty as to how and by whom the delivery of agreed OPEC and non-OPEC oil cuts will be assessed.

“The creation of a 5-member panel of governments to scrutinize the level of compliance for OPEC producers is a positive first step. But uncertainties remain and failure to ensure sufficient transparency for both producer nations and market participants could undermine the objective of stabilizing prices that producers have set themselves,” said the report.

Excluding the natural decline in output from countries with mature production facilities, e.g. Mexico, the analysts believe that cuts will exceed 400,000 barrels per day at peak.

The world's largest producers agreed to curb production for the first time since 2008 in a bid to support prices after the Vienna meeting on November 30. The OPEC, which accounts for a third of global oil supply, agreed to cut production from January by around 1.2 million barrels per day (bpd), or over 3 percent, to 32.5 million bpd.

Iraq, OPEC's second largest producer which had previously resisted cuts will cut output by 200,000 bpd to 4.351 million bpd. Saudi Arabia said it would take the lion's share of cuts - reducing output by almost 500,000 bpd to 10.06 million bpd - to get the deal done. Iran was allowed to boost production slightly from its October level.  

Non-OPEC member Russia agreed to cut output by 300,000 bpd.

Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017 for six months, extendable for another six months, to take into account prevailing market conditions and prospects.

Meanwhile, oil prices have again fallen on the world markets. On NYMEX (New York Mercantile Exchange) cost of the US Light crude oil decreased $0.22 to stand at $51.90. Price of the Brent crude oil at the London ICE (Intercontinental Exchange Futures) fell $0.11 to trade at $54.81.

The price of a barrel of Azeri Light crude oil decreased $0.01 to stand at $56.19.