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Oil prices seen recovering in 2017 but how much remains debatable

As theOrganization of the Petroleum Exporting Countries was meeting Sept. 28 in Algiers,Algeria, to discuss curbingoil production, a group of industry experts were gathered in New York City discussingthe upside for crude oil prices in the coming years.

WhileWTIand Brentfront-month oil futures prices currently remain below $50/bbl, many pundits arelooking for higher prices, perhaps as high as $75/bbl for Brent prices, in 2017.

Bankof America Merrill Lynch is forecasting an average price for Brent futures at $61/bblnext year "based on production uncertainty" from Nigeria and Algeria,as well as uncertainty surrounding demand.

Speakingat the Benposium East conference in New York on Sept. 28, Max Denery, the bank'svice president of commodities research, said $61/bbl represents the "sweetspot" but that prices could actually average anywhere from $52/bbl to $69/bbl.

Lookingto a strong recovery in oil demand from China, Antoine Halff, director of globalmarkets at the Center on Global Energy Policy, Columbia University, admitted heis "even more bullish than the consensus," projecting Brent to average$75/bbl in 2017.

However,not all of the panelists agreed that prices would jump as much as 50% in a year.While not providing a specific forecast for Brent prices, WTI will likely averagenear $53/bbl next year, with Brent carrying a premium of a few dollars, accordingto Trey Cowan, senior industry analyst for the RigData division of S&P GlobalPlatts.

Similarly,Ben Tsocanos, director of corporate and government ratings at S&P Global Ratings,said prices would likely average between $50/bbl and $55/bbl through 2018 and 2019.

"ForNorth American producers, $50 has really been the trigger to ratchet activity backup again," Tsocanos said. "I think we will see more investment in thelow $50s."

On Sept.29, Fitch Ratings said the OPEC announcement supports their view of a price recovery,but does not make a strong rebound materially more likely.

"Ourlong-term expectations for both Brent and WTI of $65/bbl reflect our view on thelong-run marginal cost of supply," Fitch noted.

BothBrent and WTI reached recent highs June 8, with front-month Brent settling the dayat $52.51/bbl and WTI prompt-month contract closing at $51.23/bbl. As of the closeof business Sept. 29, November Brent futures were at $49.24/bbl while November WTIwas at $47.83/bbl.

S&P Global Platts and S&PGlobal Ratings are divisions of S&P Global Inc., which also owns S&P GlobalMarket Intelligence.