Brent oil price is expected to reach $55 per barrel in 2020, according to a new report by Barclays Capital, which does not expect major supply gap in the market. However, oil prices will increase from 2021, the report said.

"We have revised our short- and medium-term price forecasts, and our estimates for 2018-2020 are now below consensus. We believe Brent prices will reach $55 by 2020," said the report.

"Yet, we remain bullish on prices in 2021-2025 and see prices reaching $70/b by 2025.

"We have made these revisions for several reasons. First, we no longer believe that the supply gap will be as big or as soon. Declining rates assumed in our previous analysis and by other consensus forecasting agencies are too aggressive and have been softened in our current analysis. Second, we assume that shale output can fill the smaller gap at a lower price. Third, we have connected the price effects on tight oil, price sensitive supply outside the US, and demand side impacts, rather than using a partial equilibrium as in prior analyses.

"We suggest investors focus on how the price equilibrium reacts to exogenous factors, which could see prices range from $48/b to $60 in 2020," the report said.

If Opec cuts more steeply or if investment is deferred through 2020, higher prices would dispatch more shale and over time would threaten demand change, it added.

The supply gap thesis is the glue that holds the Opec deal together. Though our modelling indicates that prices are likely to gradually increase, technological developments outside Opec’s control will make the gap elusive and smaller, Barclays said.

The resource availability of tight oil, continued technology improvements, producer focus on short cycle opportunities worldwide, and immense remaining production potential will likely fill the supply gap to 2020 at far lower prices. -TradeArabia News Service