In May, OPEC and allied non-OPEC members agreed to cap oil production through to March 2018. However, despite OPEC and non-OPEC producers ratifying a deal to extend output cuts, prices have slumped.
Brent crude futures, the international benchmark for oil prices, have tumbled more than 9 percent since the announcement, in part because of the increased production levels of Nigeria and Libya – two OPEC members exempt from cutting output.
Michael Cohen, Barclays‘ head of energy commodities research, told CNBC on Tuesday that while he remained “constructive” regarding oil prices in the short term, he had significantly lowered his price projections over the mid-term.
Cohen argued the reason he slashed his forecast was because the market still had too much supply and U.S. producers had proven they were able to do more with less.
“(U.S. producers) were able to add more volume in 2016 than they were in 2012 at half the price. So even though we expect some cost inflation over the course of this coming year, it won’t be enough to limit them and to handicap them just because of the productivity gains and efficiency gains that they’ve been showing,” he explained.
Brent crude traded at around $46.59 a barrel on Tuesday morning, down 0.64 percent, while U.S. crude was around $44.14 a barrel, down 0.59 percent.
