Bloomberg experts have named new oil prices appropriate for the world’s major oil exporters to avoid losses and make at least tiny profits. They rely their projections on the recent research made by Wood Mackenzie, a consulting company saying that at $53/b and above, the world’s 50 major oil companies will stop suffering losses and start capitalizing on their oil exports to some extent.
At the same time, the mentioned oil price is going to stimulate higher oil production and back the required amount of cash inflow for more of the oil companies out there. The representatives of Nabors Industries, Pioneer Natural Resources, and ВР have already confirmed that.
At the same time, the international community is discussing the question of oil prices after the failed oil summit in Qatar. Some experts believe that the expectations of a positive outcome used to be supporting the oil market over the past few months before the summit. Should the participants have agreed, this could have set oil prices much higher than they are today.
However, the summit failed. Which is why most of the international experts out there see this as a strong bearish sign since the situation creates more space for further oil wars between the world’s major oil-exporting nations fighting for their market share and trying to oust their rivals out of business. On top of that, higher production may lead to a bigger imbalance.
The current situation in the global market of crude oil resembles the one seen in the first half of 2015. For those of you who don’t remember, the prices were still rallying at the time when they managed to recover all the way up to $65/b in May 2015. At that time, people were convinced that the market had already hit the bottom, which happened to be a wrong assumption.
In August 2015, the market start getting increasingly concerned about the economic situation in China and the devaluation of the Renminbi. Since China was and still is the world’s biggest oil importer and consumer, those concerns eventually sent oil prices much lower, all the way down to the price area below $40/b. The next bear run was seen in January 2016, when the market found out that the U.S. shale oil industry happened to be more immune to very low oil prices than predicted by the EIA. This time, the prices crashed all the way down to he area between $28/b and $27/b. At that time, OPEC showed once again its inconsistency and helplessness in dominating the global market amid the absence of agreement between OPEC members. That’s why oil managed to set a new 15-year low!
The bottom line is that it’s useless to give any precise predictions related to the international market of crude oil. Still, chances are that the market has found the bottom and the prices are not going to dive below $30/b, at least in the coming months. In order to see another major crash in the oil market, a bunch of major shocks at a time is required to hit it. Once again, we shouldn’t discard the seasonal growth of oil prices seen in Q2 and Q3. On top of that, there are no fundamentals capable of pushing oil prices much higher today. That said, uncertainty is still dominating the market, which means you’d better be careful when trading crude oil these days.
