Macquarie Research has revised its forecast for Brent and WTI, and the outlook—especially from the perspective of oil industry—is not good.

Macquarie’s Brent price target for 2016 is now $58, down from $68. The price expectation for 2017 has been revised to $67 from $81. The Brent long-term estimate has been lowered to $80 from $84. For WTI, the 2016 price target has been dropped from $62 to $53. For 2017, the price expectation declines from $75 to $61.

“Key to our rebalancing thesis is that large production-growth regions in 2015 will not repeat their performance in 2016,” lead analyst Vikas Dwivedi said. Specifically, Dwivedi cited waning expectations for Saudi Arabia, Iraq, Russia and the North Sea.

Macquarie does not see the global balance returning to normal levels until the fourth quarter of 2016. “In many ways rebalancing has already begun, but the current oversupply of 2 million barrels per day is a large burden to overcome,” the forecast said.

For the remainder of 2015, “we expect tremendous volatility to continue as increasing amounts of passive capital inflows are met with continued bearish fundamentals and short interest from fundamental traders,” Dwivedi said.

The forecast expects markets to remain oversupplied through 2016. “We continue to expect the crude oil markets to remain dominated by oversupply, but expect the oversupply to last longer. Moreover, even when the physical markets begin rebalancing in late 2016, the massive overhang of crude oil in storage will act to depress prices and act as effective spare capacity in a market producing at near full rates,” the report stated.

Other takeaways include:

Global supply growth needs to slow considerably to rebalance the market in 2016: Macquarie is modeling global production growth to slow 310,000 and 420,000 barrels per day for 2016 and 2017, respectively. The reduction in 2016, according to the report, is being driven by a sharp slowdown in U.S. oil drilling and limited production growth from countries and regions that had large gains in 2015, including Saudi Arabia, Iraq, the North Sea and Russia.

OPEC growth will continue in 2016 due to 2015 momentum and Iranian growth: “Despite the sharp deceleration we are expecting in production growth from Saudi Arabia and Iraq, we continue to forecast impressive production growth from OPEC of 870,000 and 800,000 barrels per day for 2016 and 2017, respectively.”

Non-OPEC production growth to slow in 2015 and decline materially in 2016: Macquarie expects the non-OPEC producing group will produce 1.2 million barrels per day less in 2016 vs. 2015. “Much of the supply rationalization will take place in the U.S., where we estimate that at the current rig count production will fall approximately 300,000 barrels per day from recent highs by year-end 2015 and another 300,000 barrels per day by year-end 2016. Our full-year model for 2016 has the U.S. falling by 400,000 barrels per day in addition to an approximate 200,000 barrels per day decline in China and a 120,000 barrel decline in Russia.”

Mike Madere can be reached at mmadere@hartenergy.com.