Oil price forecast: Why values may NEVER rise above $50 again
OIL prices have plunged to four-months lows in recent days, as experts forecast levels may struggle to rise significantly past $50 in the future.
By LANA CLEMENTS
Express.co.uk
Sun, May 7, 2017
In just a month, Brent Crude has gone from almost $57 a barrel to less than $48 a barrel, as fears of oversupply once again gripped markets.
The black commodity was hit as data showed the US has continued to produce far more crude than expected.
It used to be the case that the OPEC cartel led by Saudi Arabia, largely controlled the price of oil.
But the US shale revolution has completely changed the market.
Saudi Arabia flooded the market with oil last year pushing prices down, in an apparent bid to put US oil producers out of business.
Shale producers have far higher operating costs so when oil prices fall, they fail to break even.
OPEC curbed production in a deal last year, help values to once gain lift.
But it appears the ability of US shale producers ability to ramp up output when prices rise has been underestimated.
Increased prices over the last four months has seen higher output from the US – again flooding the market with supply, which causes prices to fall back again.
In June 2014, prices were at more than $100 a barrel.
But experts say the US shale movement mean those values may never be seen again.
Michael Baxter, economics commentator for The Share Centre, said: “It seems that markets may have underestimated the extent and speed with which shale gas production can be turned up and down.
“When the oil price was less than $40, as it was 15 months or so ago, shale gas producers eased back, cutting production, leading to rising oil prices.
“However, it is beginning to look as if the ceiling to the oil price in the current environment is around $50, at which point shale gas producers start to rump up production.”
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