Crude price may continue to be low at least for next five years; says forecasters

Ace forecaster, Goldman and Sach has predicted that the present low crude price may stabilize at $60-65 per barrel for US Brent, during the period 2016-2020.

The investment banker has also noted that the price may be as low as $55 by 2020. Goldman and Sach’s new forecast comes when prices showing an increasing trend supported by marginal factors like positive manufacturing data from China, which is the largest importer and second largest consumer of crude.  

The Brent was trading at a recovery type price of $67 most of the last week. But the bank has cautioned that this rising trend is a premature one and doesn’t match to the underlying factors.

Last week, Reuter’s analysts also asserted that there is no connection between the rising future price of crude and the increasing unsold stock of it in the physical market. “Tens of millions of barrels are struggling to find buyers in Europe with traders of West African, Azeri and North Sea crude blaming poor demand” -observed Dmitry Zhdannikov, Ron Bousso and Libby George of the Reuters.

Similarly, the price trend setting rivalry between the new boy- the US Shale producers and the traditional OPEC countries is still going on. The OPEC has not made a production cut decision yet, in its effort to disincentivise shale investment.

The OPEC has decided not to make a price cut in its November 2014 meeting at the insistence of Saudi Arabia.

Now the next meeting of the Cartel is to be held on June 5th. Chances are that the cartel may not take any new decision on production volume. Recently strengthening rivalry between Iran and Saudi Arabia may block the cartel to enforce a decision. Hence, there is every chance that the world will ‘float on a glut of oil’ for a considerable period of time in the coming years. Consumer countries like India can get relief as the present good days are not going to cease soon. 

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