Analysts weigh OPEC price boost against hit from U.S. shale: Reuters Poll

(Reuters) - Oil markets are starting to tighten, prompting industry analysts to raise their 2017 price forecasts, but they remain cautious that rising U.S. production could offset any major price gains from OPEC’S output deal.

Crude oil storage tanks are seen from above at the Cushing oil hub, appearing to run out of space to contain a historic supply glut that has hammered prices, in Cushing, Oklahoma, March 24, 2016. REUTERS/Nick Oxford/File Photo

Brent crude futures will average $58.01 a barrel in 2017, according to a Reuters poll of 31 analysts and economists. The current forecast is slightly higher than the $57.43 forecast in the previous survey.

It is the second consecutive monthly poll in which analysts have raised their price outlook for both Brent and U.S. crude average prices in 2017.

Brent LCOc1 has averaged about $55.45 so far this year and analysts believe U.S. President Donald Trump's administration could bring in new legislation to support the oil and gas industry.

“The Trump presidency should benefit the oil sector. It’s not clear which measures will be implemented, but lower taxation and lower concerns about tighter environmental constraints would benefit U.S. domestic production,” said Intesa SanPaolo analyst Daniela Corsini.

There is a risk Trump’s proposed policies may lead to an even greater rise in U.S. oil production, which has been growing more quickly than many expected in the last year, according to several analysts.

“U.S. shale oil production could surprise to the upside this year,” Commerzbank analyst Carsten Fritsch said. U.S. crude oil output has risen by about 6.3 percent since the middle of last year to 8.96 million barrels per day (bpd).

U.S. energy companies last week added oil rigs for a 12th week in the last 13, extending an eight-month recovery that is tapping into OPEC’s commitment to curb production that has kept crude prices above $50 a barrel since early December.

A further rise in shale oil output could be tempered by lower prices and the possibility of a renewal of U.S. sanctions against Iran, some analysts believe.

“At the end of the day, U.S. shale oil drilling will depend on the prevailing market prices and there’s not much Trump can do about that,” said Capital Economics analyst Thomas Pugh.

One of the keys for the balance between supply and demand of oil this year is adherence by OPEC and a number of other exporters to an agreement to cut output.

OPEC and some of its non-OPEC rivals, including Russia, in late November agreed to a joint cut in production for the first time since 2008, by around 1.8 million bpd.

Analysts said the market should rebalance by the middle of this year, but it would take an extension of the OPEC output cut beyond the originally planned six months to maintain stability.

Relations between the United States and other key producers like Middle Eastern countries and Russia, a stronger dollar, and the geopolitical situation in Libya and Nigeria were among other factors that could continue to affect prices, analysts said.

    The poll forecast U.S. light crude CLc1 will average $56.08 a barrel in 2017 and $60.61 in 2018. WTI has averaged about $52.63 so far in 2017.

Raymond James had the highest 2017 Brent forecast at $73 per barrel, while Commerzbank had the lowest at $50.

Additional reporting by Koustav Samanta in Bengaluru; Editing by Amanda Cooper and Adrian Croft