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Venezuela Forced To Shut Down Production As Operations Fall Apart

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European Commission Forecasts $41 Brent for 2016

The European Commission is now forecasting that Brent crude oil prices will average $41.1 per barrel for the rest of this year, and $45.9 per barrel next year—meaning that we will not be able to maintain the $45+ per barrel that we are seeing right now.

In its Spring report which contains forecasts for the European economy, the EC notes that while oil averaged $53.4 per barrel in 2015 and reached a low of $28 per barrel in January this year, the recovery in April to over $40 is likely to be maintained, even if just.

According to the EC, lower output—among both OPEC and non-OPEC countries—led to a slight tightening of supply in March/April, but overall output declines were partly offset by an increase in Iranian production. At the same time, the disappointment at Doha was balanced out by output declines in Kuwait, Nigeria and Venezuela.

Related: Why China Is Really Dictating the Oil Supply Glut

Price pressures are likely to be capped due to high levels of stocks and emerging market growth concerns, the EC predicted.

This morning, oil prices fell on rising Middle East and North Sea production.

Brent crude futures were trading 37 cents lower at $45.46 per barrel, retreating from earlier gains. WTI futures were also down 37 cents at $44.41 per barrel.

Related: North Sea Oil Town Hit Hard By Low Prices

“Fiscal policy in the euro area is expected to be supportive of growth this year. But although oil prices fell again in early 2016 and prolonged the boost to real disposable incomes, the strength of this support should gradually fade as the oil price rebounds,” the European Commission said in a statement.

“Similarly, although euro area exports are still benefiting somewhat from the euro’s past depreciation, the currency’s recent rise could make the euro area more susceptible to the effects of slower external growth.”

By James Burgess of Oilprice.com

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