Oil exposed to significant downside risks in 2017 - Natixis

Analysts at Natixis made downward revision to their 2017 oil price forecasts as they see significant downside risks remain in the markets.

Key Quotes:

“The historic OPEC & non-OPEC deal gave an almost 20% boost to oil prices immediately afterwards in early December as investors increased their net long positions.

However, prices have hovered around $55/bbl for Brent for the most part of December 2016 and January 2017.

We believe that the markets have found a new floor from the OPEC & non-OPEC deal and a cap from the potentially quick return of US oil.

With the resistance to oil prices at the beginning of 2017 so far from the current excess supply in the physical market and the factors mentioned above, we have revised our forecasts for all three scenarios down slightly to adjust for the current market conditions in 2017H1.

In our central scenario, we now expect Brent to average $61.3/bbl in 2017 and WTI at $59.0/bbl for the same year. We expect reduced capex from the last two year, cost inflation and OPEC & non-OPEC compliance of 80% to keep prices well supported despite a moderate return of US oil.

The updated forecasts for Brent and WTI is roughly $3/bbl less than our previous revision made after the OPEC deal on 30 November 2016, with the most significant corrections on 2017H1 prices.”