The European Commission lowered its forecast for Brent barrel prices to $55.50 by the end of this year, according to the group's Spring 2017 Economic Forecast.
An earlier edition of the report predicted prices to reach $56.40 at the end of December. The new revisions follow a week of tumbling oil prices as Libya and Nigeria report record outputs after years and months of domestic strife, respectively.
The report also tied increases in inflation of the value of the euro to volatile energy prices.
"Assumptions for Brent prices have been revised slightly downwards to an average of USD$55.50 a barrel in 2017 and USD$55.90 a barrel in 2018, 1.6 percent lower than in the winter 2017 forecast," the report said. "Global oil supply stood at 96.5 barrels a day in February, which is below the International Energy Agency (IEA) projection for 2017-Q1 global consumption of 96.7 million barrels a day, implying slightly declining inventories. The IEA's projection for global oil demand growth in 2017 is 1.4%, which is below the 1.6% increase recorded in 2016."
The Organization of Petroleum Exporting Countries (OPEC), of which not a single European Union country is a member, has curtailed its output by over 1.2 million barrels per day, as promised in a November deal. But increasing production from Nigeria and Libya, both OPEC members that are exempt from the quotas, and rising activity in the American shale sector is hampering efforts to recover oil prices.
Related: 3 Reasons Natural Gas Is Heading A Lot Higher
The cut deal is set to expire in June, but OPEC members will discuss a possible extension of the deal on May 25 in Vienna during its quarterly summit. The eleven NOPEC countries that agreed to cut another 600,000 bpd of crude production will also meet there.
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