Oil prices rise but Opec production will keep them around $60 for 2014

Oil prices have risen by 2% today (Monday 22 December), however analysts warn it's unlikely that the average price for 2014 will exceed $60 per barrel (bbl).

The Brent futures contract reached around $63/bbl while US crude oil rose 2.3% to $58.45/bbl.

"Any oil relief rally is likely to be limited and short-lived, barring a major outage. We see too many headwinds that must be addressed," said Morgan Stanley in an analyst note.

National Australia Bank cited as a constraining factor "the lead time in permit approval and rig construction ahead of oil production, a sizeable negative US supply response given the price drop is unlikely to take place until late 2015, which places further downward pressure on oil prices in the first six months of next year."

Meanwhile, ANZ analysts said: "An oversupplied market is likely to keep crude oil prices under pressure in the first half of 2015, while demand struggles to recover in Asia."

Oil prices have plummeted over the last few months and hit a five-and-a-half-year low of under $60/bbl in December.

According to the International Air Transport Association, global airline profits next year will expand by 25% to $25bn as the oil price collapse has led to fuel prices plunging 51% from its triple digits peak.

In 2013 and 2012, oil prices averaged $100/bbl.

The Organisation of the Petroleum Exporting Countries (Opec) has been blamed for not stepping in and reducing production amid high supply and low demand.

"We are not going to change our minds because the prices went to $60/bbl, or to $40/bbl," Suhail al-Mazrouei, energy minister of the United Arab Emirates said recently.

Opec members reiterated that the group would stand firm despite the price falls.

"The decision has been made. Things will be left as is," said Abdallah Salem el-Badri, secretary general of Opec.

"The fundamentals should not lead to this dramatic reduction [in price]. Some people say this decision was directed at the United States and shale oil. All of this is incorrect. Some also say it was directed at Iran and Russia. This also is incorrect."