The oil market has "turned a corner" and Brent oil barrel prices will increase to $50 in the third quarter of 2016, "if not earlier", according to an analysis published by Citigroup on Tuesday. By the end of 2017, the price will stand at $65, the report predicts.
It said the prices of other commodities, including gold, grains and other products, will also rise during the oil-led recovery. By the end of 2016, the price of gold will increase to $1,250 an ounce, marking a $100 increase, according to the forecast.
"This recovery is starting in the oil sector, where market fundamentals are tightening much faster than we had forecast at the start of the year," the report read.
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"Across the industrial metals, markets are also slowly firming and prices bottoming as new projects get postponed and surpluses are whittled down. So too in the agricultural sector, especially grains and sugar, where markets appear to be balancing quickly."
In January, Brent crude oil prices hit a 12-year low, prompting Citigroup to predict a $50 per barrel price in the fourth quarter of 2016. Since then, its price has regained around 70 percent of its lost worth due to supply cuts and strong demand, prompting the Wall Street bank to adjust its forecasts.
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A slide in production in non-OPEC countries has bolstered the price stabilization process for the oil market, the report said.
The president of OPEC told the Associated Press on Tuesday that oil prices needed to reach $65 a barrel in order to secure future energy supplies and spur new investment in the sector.
On May 24th, Brent traded at $48.60 a barrel and West Texas Intermediate (WTI) stood at $48.71, according to NASDAQ.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More