By Ovunc Kutlu
ANKARA
Oil prices will continue to decline in December, towards $70 per barrel, while the forecast for average oil prices looks more optimistic in 2015 and 2016, says a report by JPMorgan Chase & Co.
The oil market monthly report for November from the multinational investment bank forecasts the Brent crude oil price falling to $70 per barrel in December and to $65 per barrel in January.
The leading global oil benchmark is forecasted to be $82 per barrel in 2015 and $87.75 per barrel in 2016 on average, says the report.
On Wednesday, Brent crude oil price fell to a new four-year-low, reaching $80.44 per barrel.
Conflict in Libya and Iraq, sanctions on Iran, the economic growth of countries, decision of OPEC members about oil production volumes and the U.S.' shale oil production are considered factors contributing to oil prices in the report.
"Libyan supplies remain subject to significant downside risks, but have approached one million barrels per day in recent weeks from just over 200,000 barrels per day six months ago," the report said.
In addition, European demand revealed to be weaker than expected, while Asian demand did not sufficiently absorb the crude supplies, as both contributed to fall in oil prices in recent months, according to the report.
OPEC countries
JPMorgan stated that the possibility of members of OPEC reaching an agreement at their November 27 meeting seems low since members have not yet shown any cooperation.
While Saudi Arabia, Iraq, and Kuwait signaled that they will not cut production in the last few weeks, Venezuela lead members who want to lower oil supplies to cut losses on oil revenues.
"In a lower price range, budgetary pressures on several member states are sufficiently stressed that the prospect of lower volumes and a year-on-year decline in revenue per barrel will not be welcomed," said the report, adding that "if OPEC is to achieve a reduction, they must all participate."
JPMorgan estimates that the oil cartel supplies must decrease its supplies by one million barrels per day in the first quarter of 2015 to evade excess crude in the market, adding that production cuts will come in February and March since an agreement may not be reached until January.
However, if oil prices move below $70 per barrel, this may pave the way for the member countries to resolve their differences, the report added.
U.S. shale oil
The investment bank forecasts West Texas Intermediate, the American benchmark for oil pricing, to be $77.25 per barrel in 2015 and $80.75 per barrel in 2016.
West Texas Intermediate stood at $78.55 per barrel on Wednesday.
JPMorgan expects a reduction in U.S. shale growth but states that its effects would be limited.
"High decline rates in U.S. shale output and comments from shale oil producers indicate that some slowdown in drilling activity is a likely response to the lower price environment," said the report.
The spread between Brent and West Texas is expected to decrease in the short-term, but will increase in the second and third quarters of 2015, according to the report.
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