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Barclays raises oil price forecasts on increasing supply risks

‘Yemen has served as a catalyst for the return of a market risk premium’ – analysts.
Barclays Plc raised its oil forecasts for this year and 2016 because of unrest in the Middle East and unplanned supply disruption in the North Sea, Brazil and Mexico.

Brent will average $60 a barrel in 2015 and $68 next year, boosting its forecasts by $9 and $8 respectively, Michael Cohen and Kevin Norrish said in a report. High inventories and weak demand will keep a cap on prices, according to the bank.

Prices have risen 17% this month in London as Saudi Arabia’s military campaign in Yemen raised concern about supply disruption from the Middle East and amid signs that US output growth is slowing. Futures were at $64.57 on the ICE Futures Europe exchange in London at 12:31 pm local time, close to this year’s April 24 high of $65.80.

“Yemen has served as a catalyst for the return of a market risk premium,” the analysts wrote. “Weak fundamentals will weigh on prevailing bullish market sentiment in the second quarter.”

Unplanned supply disruptions have cut production by almost 3.5 million barrels a day, according to Barclays, the same level as in May when Brent traded at about $109 a barrel, the bank said. Global supply rose by that volume in March from a year earlier, the International Energy Agency said April 15.

West Texas Intermediate, the US benchmark, will average $54 this year and $64 in 2016, according to Barclays, compared with $46 and $57 previously.

©2015 Bloomberg News

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