Investing.com – Though JP Morgan increases its estimate for oil prices in 2017 due to what the bank considers to be overly cautious sentiment surrounding the compliance of major oil producers to reduce production, they warned that the fourth quarter was likely to see downside risks to the deal to cut output.
“Consensus expectations on the scale and longevity of the proposed OPEC/non-OPEC cuts appear too cautious, skewing near-term price risks to the upside,” these analysts explained, raising their estimate for the barrel of Brent to $58.25 and West Texas to $56.25.
“However, we now harbor mounting concerns that cheating will inevitable undermine commitment to the agreement at some point in the second semester,” they warned.
These experts pointed out that any “cheating” on the deal to cut production would likely coincide with a rebound in U.S. shale output as a consequence of higher prices.
“Consequently, we now envisage a return of stock builds in the fourth quarter of 2017 that exerts renewed downward pressure on oil prices,” these experts concluded.
At 5:40AM ET (10:40GMT), U.S. crude oil futures gained 0.32% to $53.12, while Brent oil traded up 0.31% to $55.38.