HSBC cuts short-term forecasts for Brent, but still sees higher prices ahead

HSBC cut its short-term forecasts for the price of oil even as it cautioned that it still expected to see a "significant" tightening in the market and higher prices over the medium-term.

The investment bank's analysts cut their forecast for the average price of Brent crude oil in 2017 from $60 a barrel to $56.0, rising to $65 in 2018 (down from $75) and $70 by 2019 (down from $76.5).

High-profile US data on inventories had yet to reveal a decisive downwards trend, but they believed it soon would.

Increased seasonal demand in the backhalf of the current year, combined with prolonged output cuts from OPEC, would see the market 'tighten' by roughly 800,000 barrels a day in the second half of 2017.

That, HSBC said, could remove a material proportion of the global inventory excess by the end of the year.

Assuming OPEC unwound its cuts in the second quarter of 2018, then the market looked broadly balanced, they said.

Higher demand would be offset by greater OPEC supplies, more US tight oil and the last of the conventional non-OPEC supply growth from the last spending peak.

However, by then the cartel's spare capacity would be "extremely limited" - barring a recovery in output from Libya and Nigeria - "leaving the global system highly vulnerable to any other unexpected events."

OPEC's impact on US shale oil was only temporary but "the impact on the rest of non-OPEC supply could ultimately be more significant and longer-lasting, longer-lasting, from a combination of mature field declines and a dramatic fall in new project sanctions."