Stay the course folks.
Oil prices are going lower again—and will stay low through 2016
Last week’s rally belied the fact that an oil surplus continues to slosh around the market. As Goldman Sachs pointed out in a note on Aug. 31, the 485,000-barrel-a-day surge in OPEC production between April and June of this year overwhelmed a 316,000-barrel decline in US production.
The reason for the stubborn surplus is that, despite the relatively low prices, drillers around the world continue to produce at breakneck speed with an eye on retaining market share once prices—as they eventually must—go back up.
Before they do turn around, prices are likely to drop very, very low—and stay there for a few years. At that point, sufficient numbers of producers will either voluntarily shut down their drills, or be forced to, and thus shrink the global oil supply.
Until then, look for more of this downward trend, with some oscillation. It could go on for a long time: Vitol, the world’s largest independent oil trader, thinks that oil will trade in a $40- to $60-a-barrel band through the end of next year and possibly into 2017.
Nick Butler, a former BP executive who blogs at the Financial Times, thinks no one should hold their breath. Low prices, he says, could last five years or more.
Oil prices are going lower again—and will stay low through 2016 - Quartz
Oil prices are going lower again—and will stay low through 2016
Last week’s rally belied the fact that an oil surplus continues to slosh around the market. As Goldman Sachs pointed out in a note on Aug. 31, the 485,000-barrel-a-day surge in OPEC production between April and June of this year overwhelmed a 316,000-barrel decline in US production.
The reason for the stubborn surplus is that, despite the relatively low prices, drillers around the world continue to produce at breakneck speed with an eye on retaining market share once prices—as they eventually must—go back up.
Before they do turn around, prices are likely to drop very, very low—and stay there for a few years. At that point, sufficient numbers of producers will either voluntarily shut down their drills, or be forced to, and thus shrink the global oil supply.
Until then, look for more of this downward trend, with some oscillation. It could go on for a long time: Vitol, the world’s largest independent oil trader, thinks that oil will trade in a $40- to $60-a-barrel band through the end of next year and possibly into 2017.
Nick Butler, a former BP executive who blogs at the Financial Times, thinks no one should hold their breath. Low prices, he says, could last five years or more.
Oil prices are going lower again—and will stay low through 2016 - Quartz
