Production cuts by members of the Organisation of the Petroleum Exporting Countries (OPEC) and other non-OPEC countries are forecast to provide a short term boost to oil prices.
However the effects are to be offset to some extent by increases in production in Canada and the US, according to the latest price forecast by Deloitte’s Resource Evaluation and Advisory (REA) group.
Last year, OPEC agreed to reduce production by 1.2 million barrels per day in 2017 and non-OPEC nations, including Russia, committed to cutting production by 0.6 million barrels per day.
However, the report states there is doubt about whether the deal will be followed firmly as many of these places are dependent on oil exports to fund their government spending.
It adds: “While some ‘cheating’ is expected, even a portion of this proposed cut should bring world supply below projected demand for 2017.”
Deloitte’s long term forecast for oil prices remain unchanged, at $75 (£61) a barrel for West Texas Intermediate (WTI) while prices are expected to reach $55 (£44.7) a barrel this year and $57 (£46) in 2018.
Andrew Botterill, Partner at REA group said: “Although we expect some slippage in actual cuts by OPEC and non-OPEC countries, there should still be enough to bring world oil supply below projected demand this year.
“That means prices should recover somewhat in 2017 but there’s nothing we’ve seen to suggest the industry is on the verge of a return to significantly higher prices anytime soon.”
The REA group also predicts some weakening of natural gas prices after recent rises caused by the onset of cold weather in most of North America.