Oil: OPEC fails to spark reversal – Lloyds Bank

Analysts at Lloyds Bank explain that front-month Brent and WTI rose from a year-to-date low of $46.64/bbl and $45.52/bbl, respectively, over the past month, but failed to stage a reversal back up to April highs.

Key Quotes

“The promise of an extension to production cuts ahead of this month’s OPEC meeting did push Brent and WTI to a high of $54.67/bbl and $52/bbl, respectively. Once actually agreed, however, prices ended up consolidating $3/bbl lower than before the meeting. Ultimately, the extension until the end of March 2018 only helped to lift prices back closer to the middle of their $58.37/bbl-$43.76/bbl range.”

“Clearly, more evidence is needed that higher non-OPEC production will not impede inventory drawdowns in the coming quarters for prices to move higher. This is unlikely to materialise until the end of Q2 at the earliest. Until then, the forward crude oil curve is likely to remain in contango – a sign that market is unconvinced that supply will be scarce. Based on this and to reflect the already unexpectedly large rise in non-OPEC production, we have revised downwards our near-term crude oil price forecasts modestly from last month. We forecast Brent and WTI to average 62 and 60, respectively, in Q4 2017.”