According to the Royal Bank of Scotland , oil prices may go down to $16 per barrel in early 2016. The experts say there is every reason to expect just that – increasing oversupply, lower demand and abnormally mild winter because of the so-called El Nino.
At the same time, the RBS expects 2016 to be much worse than 2015 from the standpoint of economy. The thing is that there are many factors pressing the global economy along with credit bubbles, declining global trade and lending, the Fed’s tougher monetary policy and so on. Still, crude oil is going to be the biggest contributor to the overall pessimism next year. The experts do no deny a break below $26/b with a further move down to $16/b somewhere in the first part of the year.
If to abstain from the technical side of the matter and focus on the fundamentals, everything boils down to the downward pressure arising from higher production and lagging demand, which inevitable creates wider oversupply and lower prices. Yet, the oversupply is going to increase since Iran and the USA are going to add their own oil to the global market. This may be a devastating blow to the entire global oil industry, especially as no one is planning to cut down on oil production under tougher rivalry in an attempt to preserve their market share and oust the rivals. You don’t have to be a rocket scientist to figure out that this environment is toxic for oil exporters. At the same time, the RBS urge the international community to pay attention to secondary and less vivid factors affecting oil prices – green energy and innovation, which are ultimately going to end the era of fossil fuels at some point in the more distant future.
