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Substantial rebalancing of oil market will support the prices through 2017, according to the analysts of the US JP Morgan bank.
Analysts revised higher their 2016 and 2017 oil prices forecasts in late May as rebalancing of the market has been substantial, with faster declines in supply in mature, hight cost production areas occurring alongside outages that are outpacing market expectations.
JP Morgan's analysts raised 2016 price forecasts to $45.3 a barrel for Brent and $44.66 a barrel for WTI. They forecast 2017 prices at $55 a barrel for both WTI and Brent.
"US production peaked in July 2015 and we see a tighter market for 26 and 2017 absent further deterioration in the world economy, or macroeconomic shocks that derail demand," analysts said in a report, obtained by Trend.
Analysts expect global oil demand growth at around 971,000 barrels per day in 2016 and 1.14 million barrels per day in 2017.
"The big picture supply adjustment that was anticipated to take hold in 26 has arrived one quarter earlier than we expected. Outages in Nigeria, Canada and Libya have offset higher Iranian and Russian supply, analysts said.
"Furthermore, 2Q16 balances are materially tighter in part as Chinese strategic stockpiling reached 0.9 million barrels per day in April. Real oil prices are now back to average."
Oil prices started the week higher on Monday as global stock markets soared on growing expectations that the UK is likely to remain in the European Union after this week's referendum, the Wall Street Journal reported.
Brent crude flirted with the key $50 a barrel mark, rising 1.6 percent on London's ICE Futures exchange. On the New York Mercantile Exchange, WTI futures were trading up 1.6 percent at $48.75 a barrel.
According to the latest forecasts of the International Energy Agency (IEA), global oil demand growth will stand at 1.3 million barrels per day.
In 2017, IEA forecasts the same rate of growth with the global oil demand to reach 97.4 million barrels per day.