Brent crude oil prices are expected to average $42 a barrel in 2016 and will rise up to $52 a barrel in 2017, a latest report shows.
The short-term energy outlook of the US Energy Information Administration (EIA) said that West Texas Intermediate, or WTI, crude oil prices will be slightly less than Brent in 2016 and it will be the same as Brent in 2017.
However, the report said current values of futures and options contracts suggest high uncertainty in the price outlook.
"Contracts traded during the five-day period ending August 4 suggest the market expects WTI prices could range from $29 a barrel to $61 a barrel (at the 95 per cent confidence interval) in November 2016," the report said.
Benchmark North Sea Brent crude spot prices averaged $45/barrel in July, a $3 a barrel decrease from June. This was the first monthly decrease since the Brent price fell to a 12-year low of $31 a barrel in January 2016.
Oil prices were largely unchanged on Wednesday, giving up earlier gains after the US government reported a surprise crude stockpile build.
WTI crude futures fell ¢5 to $42.75 per barrel by 10.50am EDT (1450GMT). Brent crude futures rose by ¢2 cto $45 per barrel.
Traders said excess supplies of crude and refined fuel products were weighing on markets, while a proposed meeting by oil producers was unlikely to result in significant market tightening.
The EIA added to the market's unease when on Tuesday it forecast a smaller decline in US crude oil production in 2016 than it projected a month ago as drilling activity picks up.
The agency now expects US oil output to fall by 700,000 barrels per day this year to 8.73 million bpd, compared with the 820,000-bpd drop it previously forecast.
Mihir Kapadia, CEO and founder of Sun Global Investments, a wealth management firm in Dubai, said: "The past three days were positive for crude oil, with prices rallying more than $2, peaking at a weekly high of $44.33 per barrel. Such gains, however, are unlikely to hold even in the short-term. Corrections are already being made this morning as traders remember the weight of oversupply and falling demand, especially in China."
"In line with World Bank forecasts, investors should be aware that Brent crude is likely to end the year much nearer the $42-$43 per barrel mark until we see global economic sentiment improve," he said.
Meanwhile, top oil exporter Saudi Arabia boosted its oil output to a record high in July, it told Opec (Organisation of the Petroleum Exporting Countries).
The monthly report from the Opec also said output from the 14-member group hit a new high last month, indicating excess global supply may persist into next year. "Cheap crude has led refiners to produce more refined products worldwide, adding to the oversupplied market," Opec said in the report.
Saudi Arabia pumped 10.67 million barrels per day of crude in July, according to figures it provided to Opec. That is up from 10.55 million bpd in June and above the previous record of 10.56 million bpd achieved in June 2015.
Other Opec producers are also boosting supply, offsetting the impact of militant attacks in Nigeria and conflict in Libya. Based on figures Opec collects from secondary sources, Opec pumped 33.11 million bpd in July, up 46,000 bpd from June.
Speaking about the possibility of Opec freezing output, Mihir said: "Oil prices were boosted this morning by reports of restrained output from Opec, moving up 0.5 per cent from the last close. The reaction came soon after Opec members called to freeze output, in the hopes of driving demand and hoisting prices upwards."
By Haseeb Haider
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