Global oil markets will continue to be oversupplied, weighing prices down until at least the end of 2015, according to a report issued by KBC.
The report cited the continuing increase in US shale production, along with surging supplies from Russia and Iraq as the key contributors to this phenomenon.
“Our view, therefore, is that the global energy market will only return to fundamental supply/demand balance by around late 2015,” the report said,
“KBC expects oil prices to weaken further over the next few months, with an average of slightly below $50/bbl for Brent crude in Q1 2015. Once the market has set a floor, we expect some buying to come in and a new equilibrium price to be established at a slightly higher level of around $60/bbl by Q4 2015. Overall, KBC expects Brent to average around $55/bbl for this year, down from about $100/bbl in 2014,” the report concluded.
With OPEC not due to meet again until June 2015, KBC do not predict any significant production cuts until then. With international talks due to get underway between Iran and the P5+1 nations in June, any alteration or relaxing of the current regime of sanctions would have a pronounced effect on global supply levels. This could see an extra 1 million barrels of Iranian oil flooding the market by as early as June 2015. However, KBC believe that this is only a moderate risk to global supply levels and are optimistic of small price gains moving into 2016.
“These talks continue to be difficult, however, so there is little chance of a breakthrough or any substantial increments from Iran by the end of this year. As demand growth is revived by the lower prices, this should give scope for modest price gains as we move into 2016,” said the report.
