US shale hinders hopes for oil market rebalancing: Polls

Prices up as tensions around Kurdistan threatens region's crude supplies

| Updated: October 21, 2017 23:31:53

An oil well pump jack is seen at an oil field supply yard near Denver, Colorado, US. 	— Reuters An oil well pump jack is seen at an oil field supply yard near Denver, Colorado, US. — Reuters

NEW YORK, Sept 29 (Reuters): Oil prices are unlikely to rise much beyond this month's two-year highs this year, as concern among analysts persists that growing US shale output will hamper the rebalancing between global crude supply and demand, a Reuters poll showed.
Brent crude is expected to average $52.60 a barrel in 2017, a touch higher than last month's forecast of $52.53. For 2018, the North Sea crude was seen averaging $54.40 a barrel versus the previous month's forecast of $54.48.
The monthly poll of 36 analysts and economists projected Brent to average over $60 a barrel by 2020.
This week, Brent hit its highest since July 2015, driven by demand for refined products and views of a quickly balancing oil market following production cuts led by the Organisation of the Petroleum Exporting Countries.
OPEC and 11 rival producers, including Russia, have committed to output cuts of 1.8 million barrels per day (bpd) until March 2018 to help global supply align with demand.
Meanwhile, US shale production is set to rise for the 10th month in a row in October to a record 6.1 million bpd.
"We expect higher output from shale oil, Libya and Nigeria will remain the main threat to OPEC efforts to limit global supply," said Daniela Corsini, commodity market economist at Intesa Sanpaolo in Milan.
"Given its sensitivity to (US futures) prices, shale oil will represent the most effective tool of the rebalancing process and will contribute to keep crude prices in a relatively narrow range," Corsini added.
Brent, which has averaged $52.48 so far in 2017, is on track for a more than 20 per cent gain in the third quarter of this year, its largest rise in the July-September period since 2004.
"With high adherence by OPEC members to the output cut decision in recent months, the market is seen tightening ... With the rise in prices, we expect the US to continue pumping higher output, thus impacting market rebalancing," said Rahul Prithiani, director at CRISIL Research.
The premium of Brent to US West Texas Intermediate (WTI) crude has grown to its widest since August 2015, at around $7 a barrel.
Analysts see this spread narrowing to trade steadily around $2.72 a barrel for 2017 and $2.79 in 2018.
WTI futures are forecast to average $49.88 a barrel in 2017 and $51.61 in 2018, versus last month's forecasts of $50.01 and $51.92 respectively for the same period.
Another report from Amsterdam adds: Oil edged higher on Friday as tensions around Iraqi Kurdistan threatened the region's crude supplies, helping Brent prices to their strongest third-quarter performance since 2004.
Global benchmark Brent crude LCOc1 was up 24 cents at $57.65 a barrel at 0911 GMT. The contract had reached its highest in more than two years earlier in the week, resulting in a fifth consecutive weekly gain. This performance is Brent's longest weekly bull run since June 2016.
US crude CLc1 traded 14 cents higher at $51.70 a barrel, on track for its strongest third quarter in 10 years and its longest streak of weekly gains since January.
Iraq's Kurds endorsed secession by nine to one in a referendum on Monday that has angered Turkey, the central government in Baghdad, and other powers, who fear the vote could lead to renewed conflict in the oil-rich region.
Turkish President Tayyip Erdogan called the vote illegitimate and has threatened to break with past practice and deal only with the Baghdad government over oil exports from Iraq.

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