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Oil expected to reach $65 by end of year

If OPEC sticks to production cuts expect oil to reach $65 dollars by the end of the year.

(WASHINGTON, DC) Despite a surge in US shale production, the average cost for a barrel of Brent crude may rise by $10 by the end of the year, according to US investment banking multinational Citigroup, as cited by Bloomberg.

Citi analysts say the increase in US shale production should be offset by extending production curbs agreed between the Organization of the Petroleum Exporting Countries (OPEC) and other major exporters led by Russia.

“With a continuation of the OPEC and non-OPEC producer deal in the second half of 2017 and the expected associated inventory draw-down, we expect oil prices to move above $60 a barrel by the second half of the year,” the analysts wrote in the note.

The bank expects US West Texas Intermediate (WTI) crude to reach $62 a barrel and Brent crude to average $65 per barrel by year-end.

At the same time, Citi experts warn that a failure to extend the output agreement may “precipitously” lower prices for crude, as increased supplied in late 2016 is still “a dark cloud hanging over the market.”

Earlier this month, Russia’s Deputy Prime Ministers Arkady Dvorkovich acknowledged the effect of the deal sealed with OPEC hadn’t delivered as much as Russian authorities expected.

The agreement on OPEC-led supply cuts came into force in January. However, the price of Brent crude has so far failed to reach $60. A barrel of Brent crude has kept to around $55 in the second half of the last month and reached $56 only after the US fired missiles at the Shayrat airbase in Syria.

WTI was trading lower on Tuesday at $52.21 a barrel, while Brent slipped to $54.83, as of 10:40 am GMT.

OPEC is expected to announce at the end of May whether it will continue output reductions aimed at propping up prices.

RT copy/TRUNEWS contribution

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