Oil price will average less in 2015 than during financial crisis

[SINGAPORE] Crude oil will likely continue falling before posting only a mild recovery in the second half of this year, a Reuters survey of analysts showed on Friday, with prices set to average even less in 2015 than during the global financial crisis.

The survey of 33 economists and analysts forecast North Sea Brent crude would average US$58.30 a barrel in 2015, down US$15.70 from last month's poll, in the biggest month-on-month forecast revision since prices last collapsed in 2008-2009.

If the forecasts for 2015 prove correct prices will average the lowest since 2005, even if they recover after June, illustrating the impact of Opec's decision to maintain output in the face of fast-growing US shale output.

"It should be a year of differing halves. The likelihood of further near-term fund selling will see Brent trade down to US$42 per barrel and WTI at US$40 per barrel by the end of Q1 2015," ANZ analyst Mark Pervan said.

"The mood will remain cautious for the remainder of the first half of the year, before high-cost US supply discipline starts to emerge in the third quarter," he added.

Twenty seven of the 28 analysts who contributed to data for both the December and January Reuters polls have slashed their forecasts. More than half of those lowered their projections by US$15 a barrel or more from last month.

European investment bank Barclays, which has the lowest forecast according to the poll, cut its 2015 price outlook for Brent by almost 40 per cent to US$44 per barrel.

Goldman Sachs, widely-seen as one of the most influential banks in commodity markets, sees WTI hovering around the US$40 per barrel mark for much of the first half of this year. It has slashed its 2015 Brent forecast by US$33.40 to US$50.40 per barrel.

Most of the analysts were in agreement that the Organization of the Petroleum Exporting Countries (Opec) would maintain its stance of not cutting production despite oil prices touching multi-year lows, with any tightening of supplies expected to come from higher-cost producers outside the group.

"Low crude prices negatively affect (US) shale oil profitability," Intesa Sanpaolo analyst Daniela Corsini said. "I expect to see lower rig counts and lower investments over the next months... before the end of the year, shale oil supply should start contracting."

Brent has averaged US$49.57 so far in January, consolidating over the past two weeks after hitting a near six-year low of US$45.19 a barrel on Jan. 13. It was trading around US$48.75 on Thursday.

The poll forecasts US light crude will average US$54.20 a barrel this year and US$64.90 in 2016. WTI has averaged US$47.24 a barrel so far in 2015, hitting a post-2009 low of US$43.58 on Thursday.

Brent's premium to US crude, known as the Brent-WTI spread, is expected to widen to US$4.10 a barrel in 2015 from around US$2.20 so far this year, the poll showed.

That would be the smallest annual Brent-WTI average since 2010. Brent-WTI averaged more than US$12.50 a barrel between 2011-2014 as the shale boom drove the US benchmark to a steep discount to its North Sea rival.

REUTERS