UBS, Other Experts Predict Prices in the High $60s in 2017

More analysts see oil reaching into the $60's this year.

A new week seems to have renewed optimism in the analytical community over the efficacy of the Organization of the Petroleum Exporting Countries' (OPEC) output reduction agreement, with UBS revising its forecast for market rebalancing from the second quarter of 2017 to the first, and Deloitte predicting that oil will reach the high $60s by the end of the year.

In the UBS report released Monday, analysts Jon Rigby, William Featherston, and Joseph Head stated that their revision was influenced by OPEC output reducing significantly since the production cut agreement made in November, with Saudi Arabia reportedly slashing production by 160,000 barrels per day (bpd), and Kuwait and Qatar cutting by 20,000 bpd.

They wrote, "Incorporating the IEA's (International Energy Agency) baseline demand revisions would, all else equal, bring forward our projected rebalancing from 2Q17 to 1Q17."

Once the market recovers and inventory drawdowns increase, the analysts predict that oil prices could rise by $5 to $10 per barrel.

Meanwhile, Mark Edmunds, oil & gas leader, Asia Pacific, for Deloitte, told CNBC that "we're going to reach rebalance this year," and because none of the countries that overproduced at the expense of their economies want a return of low prices, "I predict prices moving into the high $60s by the end of the year - I'm actually pretty optimistic about where they could go."

He added that less capital investments made by U.S. shale producers over the last two years will help rebalance the market in 2017 and "could even lead to a spike in prices" in the next two or three years.

Edmunds' sentiments were echoed by Mohammed Saleh Abdulla Al Sada, energy minister for Qatar, who told CNBC that he too believes the oil market is likely to reach a balance, due to the success of the OPEC cutbacks.

It's worth noting that this week's optimism seems to stem from the meeting in Vienna of OPEC members, who laid out a much anticipated framework for cutback compliance, and who, according to CNBC reporter Hadley Gamble, "think" that 1.7 million barrels have already "been wiped off by the end of this month, ahead of schedule."

About the only faction not sharing in the optimism was the market: U.S. crude on Monday settled down 47 cents to $52.75.

Phil Flynn, analyst at Price Futures Group, remarked, "Despite comments over the weekend at the OPEC compliance meeting that cuts in the OPEC/non-OPEC production were ahead of schedule, a sharp rise in U.S. rig counts and talk of large increases in capital spending seem to be souring the bullish mood."

Indeed, Baker Hughes data published Friday showed that U.S. drillers last week added the most rigs in nearly four years.

The Baker Hughes data was accompanied by International Energy Agency data showing that U.S. stockpiles are at 483.1 million barrels, the highest seasonal level in more than three decades; and a Reuters poll showing that Russian production will reach record highs after the end of the OPEC cutback agreement.