Elevated Opec production and a smaller decline in non-Opec output than anticipated are delaying the expected rebalancing of the market, Samba said, even as the financial group has revised down its price projection for next year to $57 a barrel.

However, while lower costs producers have been maintaining or even increasing production, the large scale cuts in new investment will eventually impact market balances, Samba said, and noted “the big question is when”.

It is now increasingly thought that non-Opec supply will grow (by a small amount) in 2017 after a large contraction this year.

Meanwhile, demand growth is expected to slow (to around 1.1mn bpd for 2017) as the boost from lower prices fades, and global growth prospects remains muted.

Since Opec abandoned its traditional role of trimming supply to balance the market and support prices back in November 2014, crude oil supply from the organisation has soared. It is now running at nearly 33.7mn bpd according to Bloomberg data, up from under 30m/b at the start of 2014. Most of the increase has come from Iraq, Saudi Arabia, and Iran, which have boosted average annual output levels by 1.1mn bpd, 0.7mn bpd and 0.5mn bpd respectively over 2015-16.

Given that Opec production is now likely very close to maximum capacity (Saudi output hit a record 10.8mn bpd this summer), it may be that Opec does not need a formal agreement for there to be an effective freeze on output.

At the least it appears that, absent a surprise restoration of full Libyan production, there is not much room for further large production gains in 2017-18.

According to Samba, oil prices have been volatile over the last few months as markets look for clear signs, or otherwise, that fundamental balances are tightening.

However, the outlook remains uncertain and data signals unconvincing. While global demand seems to be holding up (expected to grow by 1.3mn bpd), there are so many variables at play on the supply side; ranging from the resilience of US shale oil producers, the shifting prospects for production in countries such as Libya, Nigeria, Iran and Iraq, and talks about a potential Opec output freeze as well as coordination between Saudi Arabia and Russia.

Meanwhile, the widely anticipated drawdown in stocks is happening much more slowly than expected, and is being interrupted by weeks of gains which are unnerving markets.

Thus, Samba said, while prices for Brent have recovered from their near $40/b lows in July/August, they have been volatile in a $45-50/b trading range since.

“Nonetheless, developments to date have caused us to revise up our 2016 average price projection to $45/b,” Samba said.