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JP Morgan revises 2017 oil price forecasts

Thursday, December 22
The US JP Morgan bank has revised the forecasts for oil prices upon OPEC’s historic agreement to cut production in conjunction with non OPEC.

The 2017 price forecasts were revised up to $58.25 per barrel on Brent and $56.25 per barrel on West Texas Intermediate (WTI), JP Morgan said in its report obtained by Trend.

“Price forecast increases are concentrated in 1Q17-3Q17, where we increase forecasts by an average of $5 per barrel,” said the report. “However, we now harbor mounting concerns that cheating will inevitably undermine commitment to the agreement at some point in 2H17. We therefore lower our 4Q17 price forecast to $55 per barrel and end-year forecast to $53 per barrel on Brent.”

JP Morgan analysts believe that there remains a degree of uncertainty as to how and by whom the delivery of agreed OPEC and non-OPEC oil cuts will be assessed.

“The creation of a 5-member panel of governments to scrutinize the level of compliance for OPEC producers is a positive first step. But uncertainties remain and failure to ensure sufficient transparency for both producer nations and market participants could undermine the objective of stabilizing prices that producers have set themselves,” said the report.

Excluding the natural decline in output from countries with mature production facilities, e.g. Mexico, the analysts believe that cuts will exceed 400,000 barrels per day at peak.

Earlier, OPEC agreed to slash the output by 1.2 million barrels per day from Jan. 1, with top exporter Saudi Arabia cutting as much as 486,000 barrels per day.

Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from Jan. 1, 2017 for six months, extendable for another six months, to take into account prevailing market conditions and prospects. (