China, Iran to put brakes on oil price recovery: poll

[September 30, 2015]  By Arpan Varghese

(Reuters) - Global oversupply and more Iranian production are likely to keep a lid on oil prices next year, offsetting any slowdown in U.S. shale output, a Reuters poll showed on Wednesday.

Benchmark North Sea Brent crude is expected to average $58.60 a barrel in 2016, slightly above the $56.63 seen so far this year, but well below the forecast of $62.30 in last month's poll, the Reuters survey of 31 analysts showed.

Fifteen of the 28 analysts polled in both the August and September surveys cut their 2016 forecasts, while 10 kept them unchanged. The poll forecast Brent would average $55.30 in 2015.

U.S. crude is projected to average $54.10 a barrel next year, down from a forecast of $57 in the August poll.

Oil prices have collapsed over the last year, falling from a high above $115 a barrel in June 2014 to a low of almost $42 in August this year.

Underlying the drop in prices is a huge oversupply as Middle East oil exporters have fought for market share with U.S. shale producers, increasing stockpiles worldwide.

Most analysts expect oil prices to stay low for some time to come until the market rebalances and stocks begin to fall.

"Prices may have bottomed in the trading range experienced over the past four weeks," Energy Aspects analyst Rhidoy Rashid told Reuters Global Oil Forum, but added that a rapid recovery in the market was unlikely.

"Prices must hold at this range for around the coming six months in order for rebalancing to occur properly."

Any increase in oil supply from Iran, if economic sanctions are lifted on Tehran, would put extra pressure on prices.

"Iranian production is likely to pick up pace next year once the country has been certified to have complied with the terms and conditions in the nuclear agreement by the International Atomic Energy Agency," Vyanne Lai of National Australia Bank said.

"A slowing Chinese economy might (also) affect investor confidence and drag oil prices lower."

Official figures show U.S. oil production has begun to decline in response to lower oil prices, but the poll suggested that this would do little to support the market short term.

"There is unlikely to be any 'end' to the shale boom," Santander analyst Kenny Jason said. "Shale will be an important part of the U.S. and global oil supply for decades to come."Bernstein had the highest 2016 forecasts for Brent at $86 a barrel, while Natixis had the lowest at $48.50.

(Reporting by Arpan Varghese in Bengaluru; editing by Susan Thomas)

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