Opec supply, resurgent shale seen keeping oil prices weak

[LONDON] Oil prices are likely to stay relatively weak for the rest of this year due ample supply from traditional Middle East producers and a resurgence of US shale production, a Reuters survey forecast on Friday.

Reuters monthly survey of 28 analysts predicted the global oil benchmark North Sea Brent crude would average US$61.60 a barrel in 2015, close to current levels.

So far this year Brent has averaged close to US$58 a barrel, down from almost US$100 in 2014.

The Organization of the Petroleum Exporting Countries (Opec) is likely to decide at its meeting in Vienna next week to keep its joint production target unchanged at 30 million barrels per day (bpd) but maintain output above that level, analysts said.

"That should keep a lid on prices," Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt, said. "The Opec meeting will confirm the strategy of protecting its market share."

Frank Klumpp, oil analyst at LBBW, said oil prices were unlikely to rise much this year, largely due to a "probable United States shale comeback".

Goldman Sachs, one of the bigger players in commodity markets, argues shale oil producers, benefiting from lower costs, will ramp up drilling activity if the price of US oil stays near US$60 a barrel.

Twelve of the 25 analysts who contributed to both the April and May Reuters polls kept their 2015 average Brent price forecasts unchanged, while an equal number raised their forecasts.

Intesa Sanpaolo analyst Daniela Corsini predicted a downward price correction over the next few weeks, with Brent dropping to around US$60 a barrel and WTI at US$55, fuelled by a return soon in Iranian supply and a recovery in US production.

"However, I expect prices will resume their increases in the second half, driven by healthy global demand and expectations of a more balanced market in 2016," Ms Corsini said.

Brent is expected to rise to US$70.90 next year and US$75.90 in 2017, the poll showed.

The poll forecasts US light crude, to average US$55.60 a barrel this year and US$65.90 in 2016. WTI has averaged US$51.79 so far in 2015.

US based brokerage Bernstein had the highest 2015 average Brent price forecast of US$80 per barrel, while UBS had the lowest outlook of US$56.25, both unchanged from the last month's poll.

REUTERS