Quarterly Oil Market Update (Q1-2016): Production "freezes" not a big deal

Lower yearly oil prices are taking their toll on shale oil producers, with Q1 2016 seeing the first year-on-year fall in US production in eight years, but record rises in OPEC and Russian crude production have more than compensated for this drop. Oil prices have shown some firmness in the run-up to the production ‘freeze meeting between a number of oil producing countries next week. In our view, there are significant risks to either an agreement being reached or a lack of implementation even if there is an agreement. In both instances we would expect the gains of the previous month or so to be lost. As such we maintain our full year 2016 Brent forecast at $33 pb with prices increasing to $44 pb in 2017.