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Fitch Predicts Drop In Oil Prices By 2017 As U.S. Shale Output Soars

Oil Rig

Oil bigwigs should take a step back before becoming too comfortable with the new oil price range according to Fitch Ratings’ newest market analysis.

“The recovery in US drilling activity will drive up shale oil production in the second half of 2017, offsetting a portion of recent oil price gains,” the credit rating agency’s report released on Monday says. “We therefore expect average oil prices for the year to be below those in January and February.”

In a stable market scenario, Fitch estimates that by the end of this year, oil prices will fall to $52.50, but then rebound to $55 and then $60 in 2018 and 2019, respectively. Long-term prospects for Brent barrels sit at $65 in this model.

A stressed, oversupplied market will mean a $40 barrel through 2019, however.

Since January, a 1.8 million-barrel global production cut led by the Organization of Petroleum Exporting Countries (OPEC) and joined by several other nations has kept prices between the $55-$60 range.

Compliance to the terms of the November deal by members of the bloc has been strong. Last week, new data showed that OPEC’s compliance stood at 94 percent.

But non-OPEC enthusiasm for the deal has been much talk, with moderate action. A February 23rd report puts compliance by the 11 NOPEC nations at a modest 60-66 percent.

Related:Tensions Rise In Iraq As Kurdish Forces Seize Oil Pipeline

Fitch cited the continuous increase of active oil rigs in the United States since May 2016 as key evidence for an impending price collapse. American production is set to top nine million barrels over the course of 2017, the analysts estimate, due to rejuvenated capital expenditure budgets and higher output capacity.

The total number of active oil and gas rigs in the United States is now 756, according to oilfield services provider Baker Hughes, which is 267 rigs above the rig count a year ago.

By Zainab Calcuttawala For Oilprice.com

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  • Bud on March 07 2017 said:
    Forecasting oil prices is a quick way to lost credibility. Plus, the U.S. Is already at 9 million bpd. And the only U.S. Fields growing production are the Permian and primarily GOM. With the U.S. Exporting a global field by field study is needed as a dollar invested in Texas may mean 2 dollars not invested in other fields worldwide. Depletion and import reductions are more important in any case. If Fitch is in on those GCC meetings, maybe they know better.
  • Arne on March 07 2017 said:
    Who exactly are u lot tryna fool? The hedge funds? Me? Come off it u jokers?!?
  • Bill Simpson on March 07 2017 said:
    Good news. Reasonable oil prices will put many Americans to work, and increase demand for all the stuff they use in drilling. Very high fuel prices act like a tax on everything. People have less money to spend on everything else besides fuel, and jobs in other industries disappear.

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