Commodities are forecast to have a bumper year in 2017 with oil prices expected to rally to the mid $60s by the end of December, according to analysts at Citigroup.
Citi analysts had previously projected crude oil prices could shoot up to $70 a barrel in a note published February, as supply and demand levels continued to rebalance.
Although, analysts at the bank suggested increased supplies from producers in the final three months of 2016 had since resulted in “dark clouds hanging over the market”. Citi also warned any failure to extend the OPEC agreement would send oil prices “precipitously lower”.
“With a continuation of the OPEC/non-OPEC producer deal in the second half of 2017 and the expected associated inventory draw-down, we expect oil prices to move above $60 a barrel by the second half of the year,” Citi analysts said in a note published Monday.
One significant risk to an uptick in crude prices could prove to be U.S. shale production, which is tipped to come “roaring back” in 2017, according to the bank. However, Citi analysts pointed to the landmark deal between OPEC and its allies as reason for investors to be optimistic that this could offset the increased levels of U.S. drilling activity over the next six to nine months.
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