The oil price is surging higher on new rumours of coordinated action to address volatility but analysts at Bank of America Merrill Lynch (BoA Merrill Lynch) reckon a wave of positive supply surprises could put an end to the rally in the medium-term.
Venezualan president Nicolas Maduro is on record as saying OPEC and non-OPEC producers are close to an output deal to stabilise oil prices sending Brent crude 1.1% higher to more than $46 per barrel. OPEC is set to hold an informal meeting at a energy conference in Algeria next week (26 Sep).
BoA Merrill Lynch comments: 'Three positive supply shocks creating increased output may happen simultaneously, reducing the oil market deficit and delaying a price recovery. Nigeria is the largest risk. Repairs in the Forcados and Qua Iboe terminals are underway, so we think output could recover from 1.46 to 1.87 million b/d in the next six to nine months, adding 400 thousand b/d to the oil market.'
The other increases in supply are expected in Libya and at the Kashagan field in the Caspian Sea.
On the flip-side the investment bank also sees the risk of falling output in Iraq, Venezuala, Brazil, China and the US. It concludes: 'Net, we believe the upside production risks are now somewhat larger than the downside production risks, potentially adding some downward pressure to our Brent crude price forecast of $61 per barrel in 2017.'