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Oil prices to stay weak for at least a year

[LONDON] Oil is likely to stay relatively weak for at least the next year, a Reuters poll forecast on Thursday, suggesting a slowdown in oil production in the United States will not be enough to offset a global supply glut.

Reuters monthly survey of 32 analysts predicted North Sea Brent crude would average US$60 a barrel in 2015, up 80 cents from the projection in last month's survey.

The North Sea crude oil benchmark has averaged around US$56 a barrel so far this year.

Brent prices collapsed to a low just above US$45 in January from a high above US$115 a barrel, and have recovered gradually over the last three months to trade close to US$66 by Wednesday's close.

The price crash has forced some exploration companies to stop drilling for oil and the number of rigs operating in the United States has fallen for 20 weeks in a row to its lowest since 2010, data from oil services company Baker Hughes show.

But global inventories are so high, with US crude oil stockpiles at an all-time record, that the market will stay weak for some time, the Reuters poll forecasts.

And US oil production will be "more robust than expected", Frank Klumpp, an analyst at LBBW, said.

While a few analysts see crude output slipping in the second half of this year, most believe that ample supplies, and the chance of extra Iranian volumes hitting the market if sanctions are lifted mid-year, will keep prices under pressure.

A deal with Iran to remove sanctions on oil exports is on the table, said Rahul Prithiani, director at CRISIL Research.

"While a comprehensive agreement is likely to be achieved by June, it will take another 3-4 months post June for Iran to increase exports as the formalities are completed. We expect oil exports from Iran to increase from the last quarter of 2015."

Some analysts believe the oil market has already touched its low this year, but relatively weak prices are unlikely to translate into increased greatly consumption.

Brent is expected to rise to US$71.50 in 2016, and US$78 in 2017, the poll showed. This is a marginal downward revision from US$72.10 forecast for 2016 and US$78.70 consensus for 2017 in the March poll.

Analysts expect the Brent-WTI spread to narrow to US$5.6 per barrel this year.

REUTERS