Oil prices go up in 2016?


22 December, AtoZForex.com, Amsterdam — Having the year-end in sight, the debate upon oil continues. Will oil prices go up in 2016 or see a further fall? According to an article earlier published on AtoZ, Goldman Sachs warned that oil prices have not fallen low enough yet, to induce production cuts for balancing the market. The bank even foresees oil prices to plunge to $20 per barrel.

A slight oil price recovery

Last week, Fed’s decision to increase interest rates by 25bp on Wednesday, pressured a rise in US crude supplies and strengthened the USD. Hence, on Friday crude oil prices fell below $35/bbl, marking the lowest level in more than 11 years.

Despite the plunge in oil prices to the lowest level, this morning crude oil prices recovered slightly from multi-year lows. Yet, today’s price gains were only limited, because of the inherent concerns on global oversupply. Oil prices go up in 2016? Despite the slight recovery, the outlook is still grim. When assessing Brent crude oil, it rose slightly today after the prices slid to its lowest level since mid-2004. In comparison with 2004, Brent Crude oil prices just traded around $36.10 a few hours back, while in 2004 it was trading $100 per barrel.

Credit Suisse foresees 5 years of low oil

Adding to the grim outlook on oil prices, according to Credit Suisse’s 2016 Global outlook, the debacle of low oil prices is to continue until at least 2020. Even though the fateful chart below of Bloomberg/Credit Suisse, displays that oil prices will be doubled from the current level to $60 per barrel by 2020, these levels will still be far much lower compared to previous years.

Oil prices, WTI

The global research team of Credit Suisse and the head of this team, Ric Deverell have commented the following:

“In our forecast, low prices force the rebalancing of global oil supply and demand. The partial recovery of price next year is required to resuscitate some supply growth into 2017, in our central scenario. At around $65/b WTI and $70/b Brent, the industry should be able to generate enough supply growth to match basecase demand growth in the medium term, if indeed OPEC supplies grow as well.”

Relating back to the question if oil prices go up in 2016? It’s evident with having these points summed up that the oil prices are not leaning against any upward ticks for 2016. Yet, the commodity super cycle will eventually turn around, what comes down must comes up.

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