"Due to new outages and a quicker Iran supply reduction, we see Brent and WTI prices averaging $71 per barrel and $65 per barrel next year," the bank said.

Barclays had previously forecast Brent to average $65 per barrel in 2019. The bank also raised its outlook for Brent prices to average $73 per barrel in the second half of the year from $70 earlier.

Libya's national oil production fell to 527,000 barrels per day (bpd) from a high of 1.28 million bpd in February following recent oil port closures, the head of the National Oil Corporation (NOC) said on Monday.

The United States says it wants to reduce oil exports from Iran, the world's fifth-biggest producer, to zero by November, which would oblige other big producers to pump more.

Elsewhere, in Canada an outage at the 360,000-barrel per day (bpd) Syncrude oil sands facility had reduced flows into Cushing, Oklahoma where inventories hit a three-and-a-half-year low last week.

While the WTI-Brent spread has narrowed since May due to the outage at Syncrude, it could widen again toward the end of the year to $7.50 in Q4, Barclays said.

The bank also said the likelihood of Saudi Arabia increasing exports to the United States in the coming months could likely weaken the strong WTI backwardation.

Oil prices have gained for most of 2018 on tightening supply and strong demand but investors fear a decision by the Organization of the Petroleum Exporting Countries to increase production may dampen price gains and offset production losses in countries including Libya. [O/R]

"Indeed, OPEC's decision and disruptions elsewhere will deplete the market's spare capacity cushion, raising prices," Barclays said, however, warning bulls to beware of Saudi Arabia's and Russia's clear willingness to cap upside in prices.

"As prices rise to higher levels, the air is growing thin and oil demand is already faltering," Barclays noted.

(Reporting by Apeksha Nair in Bengaluru; Editing by Keith Weir)