Oil analysts turn cautiously positive but warn rally may fade: poll By Vijaykumar Vedala
Oil analysts have raised their average price forecasts for 2016 for the first time in 10 months, but cautioned that investor sentiment may sour short-term without solid improvement in market fundamentals, a Reuters poll showed.
The oil price has risen by about 45 percent from 12-year lows close to $27 a barrel reached in January.
"The recent rally is more a comeback from very bearish sentiment that took place at the beginning of the year with China headlines, Iran sanctions lifted, reasons that we actually found to be an irrational move of the market," Raymond James analyst Luana Siegfried said.
The survey of 31 economists and analysts forecast benchmark Brent crude would average $38.60 a barrel in the second quarter of this year, against current levels around $40.
For 2016, analysts raised their average Brent forecast to $40.90 a barrel, from $40.10 in last month's survey, marking the first increase since last May and up from the current average for the year to date of $35.
The prospect of an agreement among the world's largest producers to keep oil output at January's levels, along with a marked decline in higher-cost U.S. shale oil output, have fed the belief among investors that January's price lows will mark the end of an 18-month-long rout.
Data from the InterContinental Exchange shows investors are more bullish toward Brent than at any time since the exchange's records began in 2011, but without a deal between OPEC and its rivals to control supply, this optimism could evaporate. [O/ICE]
"A very simple analysis of the relationship between investor positioning and recent price movements in oil suggests the potential for a 20-25 percent move down in prices if positioning were to return to the average levels of the past few months," analysts at Barclays wrote earlier this week.
Most analysts polled for the survey agreed that the oil price may not have much reason to fall below January's lows, but softer demand projections and a weakening economic outlook could limit the scope for bigger gains.
"Prices advanced rapidly without necessarily reflecting the tightening of the physical market," said Giorgos Beleris, analyst at Thomson Reuters' Oil Research and Forecasts.
"Regardless, this could signify the start of a recovery as we are approaching the summer, when demand typically picks up in the western hemisphere on the back of higher motor fuel consumption."
Analysts said that without Iran's participation, any deal struck on managing supply at the April 17 meeting in Doha among OPEC and non-OPEC exporters would be little more than symbolic and unlikely to erode a global overhang of unwanted crude.
"Iran's refusal to participate means more countries will need to make greater cuts for longer if such a deal is to be effective. Given diverging interests and persistent distrust, this is unlikely," said Sebastien Marlier, commodities analyst at the Economist Intelligence Unit.
Analysts see U.S. crude futures averaging $39.70 a barrel in 2016, up 80 cents from the February poll forecast. West Texas Intermediate (WTI) has averaged about $33.50 so far in 2016.
Morgan Stanley had the lowest 2016 forecast for Brent at $33 a barrel, while Raymond James had the highest at $53.
(Additional reporting by Koustav Samanta in Bengaluru; Editing by Amanda Cooper and Dale Hudson)
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