Oil prices fall as banks cut price forecasts
London: Oil prices fell on Tuesday as global oversupply encouraged several banks cut their price forecasts. Benchmark Brent crude was down 30 cents at $46.58 a barrel by 3.15pm. US crude was 25 cents lower at $44.15.
“The fundamental mood has taken a turn for the worse,” Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, said.
He said BNP Paribas had slashed its forecasts for Brent by $9 to $51 a barrel for 2017 and by $15 to $48 for 2018.
Barclays bank also cut its 2017 and 2018 Brent forecasts to $52 a barrel for both years from $55 and $57 respectively. Signs of strong short-term demand helped stem losses.
Gasoline demand tends to increase in the northern hemisphere summer as US drivers take to the road. Weekly US gasoline demand data “compares favourably to the five-year average and miles driven also continue to grow year-on-year,” Bank of America Merrill Lynch said in a note.
But it also said, “US gasoline demand may have peaked in absolute terms last year,” adding that it expected no structural tightness once the peak demand summer season was over.
Crude prices are about 18% below their 2017 opening levels despite a deal led by the Organization of the Petroleum Exporting Countries (Opec) to cut production from January.
Opec, along with Russia and some other major exporters, has agreed to hold production at about 1.8 million barrels per day (bpd) below levels pumped at the end of last year.
The limits will be maintained until March 2018 in an attempt to drain a global glut, but production elsewhere has risen as Opec has held back.
US oil production has jumped more than 10% over the last year to 9.34 million bpd. Nigeria and Libya, Opec-members who are exempt from production limits, have also increased output.
“Opec has yet to address this increase in production,” Goldman Sachs said in a note.
Without further cuts by Opec and other producers or a significant fall in oil inventories or a decline in US drilling, Goldman said crude prices could fall below $40 per barrel. Reuters