Oil analysts have grown more unsure that OPEC’s supply cut will be enough to offset the increase in U.S. 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 U.S. supply is expected to partly offset cuts by the Organization of the Petroleum Exporting Countries and their partners, said Rahul Prithiani, director at CRISIL Research.
“If U.S. producers keep on increasing output at the same pace then rebalancing in the oil markets is expected to get delayed beyond 2017,” he said.
U.S. 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 U.S. Energy Information Administration report 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.
“Poor commitment from outside the group could threaten the remainder of the agreement as Saudi Arabia is pulling most of the weight, while Russia, which in many cases is a direct competitor, has failed to deliver the promised cuts,” said Giorgos Beleris, analyst at Thomson Reuters Oil Research and Forecasts.
OPEC oil output is likely to fall for a third straight month in March, a Reuters survey found on Wednesday, as the United Arab Emirates 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 U.S. stocks have led speculators to cut holdings of U.S. 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 U.S. shale investment and production,” said Cailin Birch, an analyst at the Economist Intelligence Unit.
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 U.S. WTI crude futures would average $55.29 a barrel in 2017, marginally lower than last month’s forecast of $55.66.