Oil Prices in Recovery?
Experts in the oil industry are predicting a return to the days when prices were as much as $60 a barrel by early 2016. Following a mini recovery in November, some in the industry are now saying that there will be a reversal of the past downward trend. Oil prices have seen heavy downturns over the course of the last 18 months, causing some major problems in the industry. This slowdown was largely due to drops in consumption from some of the West’s biggest economies, but most put it down to the fact that the economy of China has slowed. Furthermore, an upsurge of domestic production in the United States, largely from shale, over recent years has also squeezed the price of imported oil from Saudi Arabia, Iran, Nigeria and Iraq.
Middle eastern oil prices
However, with some doubt over the stability of Middle Eastern oil supplies, not least because of the current situation in Syria, some investors now expect oil prices to rise, especially if further military intervention is announced. An expert in oil prices as Commerzbank was reported as saying that prices had been gaining ‘slightly’ in the immediate aftermath of the terrorist attacks in Paris. Following other, similar events in the past, oil price recoveries have followed. However, none have really gone on to buck the longer term downward trend. Despite this, experts at Barclays Corporate Broking claim that the current situation differs.
There are ‘growing signs of hope’ which are around the corner according to a recently published report by Barclays in which the oil industry, may see an ‘eagerly-anticipated recovery.’ The report forecasts that oil prices could rise to as much as $50 per barrel by the end 2015. However, by early 2016, they say that prices of up to $60 per barrel are feasible as worldwide demand increases. This will be of marked interest to oil workers as well as investors. Nevertheless, these prices are still some way off the heady days of June 2014, when the level of $114 a barrel was reached.
According to Barclays, the upturn in prices is less down to production issues and more down to demand. They say that a ‘sustained doubling of growth’ in the demand for oil will occur, which translates into something like four million barrels per day. The report states that the UK energy sector is currently engaged with one of the most challenging periods of its history and that while the picture for North Sea producers may remain difficult in the short term, ‘there is a growing sign of hope on the horizon.’ Oil demand has risen threefold since November 2014. It has gone up from 700,000 barrels per day last year to 2.1 million barrels per day currently and Barclays predict this trend will continue.
