6 October, AtoZForex.com, Lagos – Crude oil prices have rebounded after hitting a low of $38 a few weeks back, now trading around $50/barrel. Prices rebounded following a report from OPEC where it was forecast that the price of crude oil will move back to $80 per barrel in year 2020. Even with the recent rebound, it will take a lot for oil prices to trade again in the $100-per-barrel level in the near future.
A further glut is expected
Another factor to consider in the long term oil prices is that as the Iranian nuclear nears a conclusion. The influx or more production from Iran into the markets will further lead to a glut, as demand is unlikely to match supply at the same pace. The Organization of the Petroleum Exporting Countries led by Saudi Arabia has increased production in an attempt to build market share, leaving some other producers, including shale companies in North America, operating below break-even costs.
Various experts have aired their view on the oil price condition. Starting of, Ed Morse the head of global commodity research at Citigroup said in an interview with CNBC:“We’d have to see a reversal in trends in global GDP growth and, more importantly, in global petroleum demand growth. We’ve seen the relationship between GDP growth and oil product demand widening considerably. For every 1 percent increase in global GDP, there’s less of a percent increase in oil demand. That will weigh heavily on the markets.”
Morse also added there are two key factors keeping oil prices down: “There is so much more oil that can be produced at lower prices, and the world has a big abundance of these new, unconventional oils, particularly shale oil. Also, OPEC countries have a need to produce more and they’ll be producing more.”
Signs of oil recovery
Ben van Beurden, Chief executive of Royal Dutch Shell Plc also pointed that the seeming recovery in oil prices is bound to be slow, considering the scale of global oversupply. He said:
“I see the first mixed signs for recovery of oil prices,” Ben van Beurden told an oil industry conference in London. But with U.S. shale oil being more resilient than we originally thought and a lot of oil still in stock, it will take some more time to rebalance demand and supply,” he added
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