(MENAFN- The Peninsula) Oil prices are not expected to show any major recovery until after 2017, says a QNB Group analysis.
The analysis forecasts that this year no substantial recovery is likely. And even in 2016 and 2017 only marginal increases can be expected.
Oil prices are likely to average at $56 a barrel this year despite a recent 31 percent recovery that took the price to peak at $59/barrel.
The average price expected in 2016 is $64/b, while in 2017, $69/b, said QNB in a weekly analysis released yesterday.
The Brent crude oil price fell 57 percent between June 2014 and January 2015, to a low of $45/b.
However, over the past three weeks there has been a recovery of 31 percent, to $59/b, but any further rise is not likely this year.
The technical factors that drove the recent rebound in oil prices may be linked to the shape of the futures oil rate relative to the spot price.
As spot prices dipped below $70/b in January 2015, expectations that supply and demand would adjust led to futures prices higher than the spot price.
The lower the spot prices became, the greater the expected increase in futures prices, resulting in the futures curve steepening.
The curve was steepest when spot prices bottomed out in "January oil for delivery in December 2017" was over $20/b above the spot price.
This may have pushed oil traders to profit from buying oil on the spot market and storing it, while selling it at higher prices on futures market.
It also encouraged hoarding and stockpiling of oil. Reports suggest that major oil traders and Chinese oil companies have booked super tankers to stockpile oil as prices plunged and US inventories reached all-time highs.
As oil prices dropped, net short positions on futures market also declined, said the analysis.
This unwinding and reversal of speculative positions may have played a significant role in the recent oil price recovery, but this is unrelated to fundamental shifts in oil supply.
The futures curve has flattened with the recovery in oil prices, making it harder to profit from buying oil on spot markets and selling it in the future.
Most speculative short positions have been unwound, resulting in less speculative downward or upward pressures on oil prices.
Having said that, supply and demand adjustments are unlikely to have an impact on prices until 2016-17.
A number of major oil companies have announced cutbacks in investment, but many of them still expect an increase in production in 2015, especially the US shale oil producers.
International Energy Agency (IEA) stated in a recent report that it expects the pullback in shale oil production to be "limited in scope".
Investment cutbacks are leading to lower numbers of operational drilling rigs in the US, but this is likely to impact production only in 2016-17.
The number of operational US drilling rigs has fallen by 21 percent to 1,456 so far in 2015.
Historical data on US rig counts, though, appear to have minimal relationship with US crude oil production.
A falling rig count during 2012 had no visible impact on US oil production, which continued rising steadily. Once a well is drilled, it can take some time for it to be developed and become operational.
Oil companies tend to have a stock of oil wells that are drilled but wait to go into full operation.
Moreover, the average productivity of oil wells has been rising in recent years and is expected to continue increasing.
As a result, the decline in operational drilling rigs is only likely to impact oil prices from 2016-17, according to the QNB Group.
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