Oil prices could rebound to $67 by 2020, but record $10B losses expected this year

The price of oil isn't going to rebound as quickly as had been predicted thanksto ramped-up worldwide production, lower demand and stockpiled supplies but the market is expected to regain its balance in 2017,according to two industry forecasts.

The global financial services firm Deloittepredicts in itsSeptember forecast that theaverage price per barrel will be$47 US for the remainder of 2016.

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In July, Deloitte saidprices would hover around $50 for the rest of thisyear,possibly touching $60at some point in 2017.

The firm now projects oil prices to average $51 per barrel in 2017.

In its latest outlook, theConference Board of Canada also takes the view thatoil marketswill balance out next year, setting the stage for a gradual price climb to$67 US for West Texas Intermediateby 2020.

But this year, the oil extraction industry is on track to post $10 billion in pre-tax losses, after losing $11billion in 2015,the board says.

"Canadian oil producers continue to be challenged by the extended battle for market-share that has kept global crude prices stubbornly low. For the first time in recorded history, the oil industry is expected to post not only the largest level of losses but also back-to-back consecutive losses," said board economist Carlos A. Murillo.

Andrew Botterill, a partner in Deloitte's resource evaluation and advisory group, says increased production and high stockpiles are keeping prices restrained in the short term.

"It may not be the quick build that we might hope for. So, that's why people are expecting it to be low a little bit longer but maybe with a little bit more stability than we've seen in the last 18 months," he said.

U.S. stockpiles pushing down prices

Even when the market balances out as is expected in the third quarter of 2017 Botterill says U.S. stockpiles could still keep prices from rising significantly.

"The optimism we saw earlier this year that the market would achieve a supply-and-demand balance has weakened over the past three months," said Botterill.

The industry's profit-margin issues are forcing major pullbacks in investment, the Conference Board of Canada says.

"Investmentby Canada's oil producers was estimated to have been slashed by close to $25 billion in 2015, with cutbacks expected to continue this year and next," the board said.

Oil prices surged by as much as six per cent late last week on news that OPEC members, who were meeting in Algeria, had reached a tentative deal to limit production.

But many analysts were skeptical that the cartel would actually firm up the agreement at its next formal meeting in November.

The Conference Board of Canada says if the OPEC agreement comes to fruition, prices could recover even faster than its current predictions.

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