Tom Randall: Outlook - oil will crash.
Unless prices surge
The outlook on oil prices is clear: Oil will crash. Unless prices surge. Definitely one or the other.
Crude just had the biggest two-week gain in 17 years, but it's still about 50 percent cheaper than it was in June. The situation is volatile, and forecasts are all over the place from $30 a barrel predicted by the president of Goldman Sachs to as high as $200 a barrel seen by the head of OPEC.
So what's going to happen next? Here's a sampling of predictions from the last two weeks:
- Oil could fall as low as $30 because supply surpluses won't disappear overnight, said Barclays analyst Miswin Mahesh.
- Oil has the potential climb to $200 per barrel from a lack of investment in new supply, warned OPEC's Secretary General Abdell El-Badri. If you don't invest in oil and gas, you will see more than $200, he said, without giving a time frame.
- Shale oil will soon be needed to make up for production declines around the world, pushing U.S. prices to as high as $65 a barrel , the head of Astenbeck Capital Management wrote in a Feb. 2 letter obtained by Bloomberg News.
- In a Bloomberg News survey of analysts and traders, 12 of 32 respondents predicted futures will decline through Feb. 13, while 10 forecast an increase .
- We don't think we've seen the bottom yet, said Giovanni Staunovo, a commodities analyst at UBS in Zurich.
- We are establishing a bottom, said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.4 billion. In the long run, probably $60 is going to be your pivot point.
- Oil will probably continue to decline and could reach as low as $30 a barrel , said Gary Cohn, president of Goldman Sachs Group Inc. We're probably in the lower, longer view, said Cohn, a former oil trader.
- The fundamental supply and demand does remind me of 1986 a bit, where we could go into a period in this decade of lower oil prices, said BP CEO Bob Dudley. Prices may stay below $60 for as long as three years , he said. It will be a long time before we see $100 again.
- Oil could fall to the $30 a barrel range , said Fumiya Kokubu, CEO of Tokyo-based Marubeni Corp. He said he doesn't see much of a price rebound in the next two or three years.
What's an investor to think? In 2015, the average price is likely to be anywhere from $35 to $80, according to a Bloomberg Intelligence survey of 86 investment specialists. That's a pretty big range.
Q: What Will Be the Average Price of Crude in 2015?
Price per barrel of WTI crude.
To be fair, some of the forecasts above aren't mutually exclusive. Some analysts think prices could drop further and then skyrocket once production dries up or there's a rebound in global demand, especially China. But the timing of a lasting turnaround in oil prices is murky at best.
The only thing that's certain is more uncertainty. Probably.
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