Oil price will stay around $60 per barrel during 2016

Analysts’ opinion is unanimous: the oil price will be at low levels for a long time. In fact, all of them foresee that it will not exceed $70 over the next year at best, because most of the forecasts indicate that quotes will stay around $60 during the whole business year.

The market has seen the oil prices fall by around 60 percent since June 2014 due to the glut generated by the boom of unconventional resources in United States. The recovery is being harder and slower than expected, and most of the firms were forced to review their forecasts in recent weeks, resulting in data notably lower than initially published, especially after the agreement between Iran and Western powers.

The return of the Iranian oil has activated alarms among experts, who are afraid that global glut might significantly increase. The Iranian oil minister Bijan Zanganeh has assured that the country is prepared to pump an additional half million barrels per day upon the lifting of the international sanctions. However, the country is not worried about the impact this additional supply will cause in international prices. “The drop of oil prices is not going to be a concern for us”, Zanganeh said.

Francisco Neri Bonilla

One of the most pessimistic analysts, Goldman Sachs, has estimated that Brent price will be at $49.50 versus the $62 initially forecasted. It also lowered to $45 from $57 the price of WTI. However, the Deutsch Bank is the most positive and forecasts that Brent price will stand at $70 and WTI at $65. Likewise, the International Energy Agency (IEA) affirms it is unlikely that oil prices climb back to $80 per barrel before 2020.
In addition, the price crisis is influencing other sectors such as Liquefied Natural Gas (LNG). This fuel is sold under long-term contracts with a formula pricing linked to oil. Therefore, gas is registering unusually low quotes.

Now, the industry is alert for the geopolitical tension created after the attacks in Paris. Although these events have not had an impact beyond a slightly recovery of prices, they may affect the confidence of consumers and, thus, oil consumption. However, conflicts in the Middle East usually boost oil prices. Therefore, the behavior of quotes will mostly rely on the way things happen in the following months.

by Francisco Neri Bonilla

Author: Francisco Neri Bonilla

Francisco Neri is an entrepreneur and a proven specialist in operations. With extensive background launching and managing different kinds of businesses he has more than 15 years of experience in delivering integrated marketing, logistics and digital solutions to multinational clients and companies. Francisco has extensive operating experience in different industries including corporate advertising and corporate communications, marketing solutions, specialized publications and high-profile events design and production. Francisco graduated as B.A. in law at UCAB.

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