OPEC output cut deal extension needed for oil to hit $60 - Citi

According to a new report from Citi Research, Brent oil prices could advance further above US$60 per barrel this year as the market rebalances and hefty inventory drawdowns, Financial Post cited.

Key Quotes:

“A hefty draw that should take Brent to over $60 per barrel, but producers will have to extend their production agreement through year-end.”

The first quarter of 2017 “brought markets back to reality as the unintended consequences of the production cut exacerbated market oversupply.”

An extension is needed “to avoid a credibility problem that is already emerging with lagging Russian output curtailment” and “failure to extend could push prices back down to the low $40s by year-end.”

“The higher the price of oil in the next year, the greater growth there will be of U.S. production, presenting a Catch-22 dilemma for OPEC and the non-OPEC countries working with them.”