Daily Management Review

Oil Will Rise to $ 100 by 2016


03/18/2015


Since early March, oil prices have fallen by more than 15%, but despite this, the decline continues.



Picture by itworksforbusiness.co.uk
Picture by itworksforbusiness.co.uk
The reason for this was the increase in the dynamics of US stocks, which increased for nine consecutive weeks and reached record highs.

According to the forecasts of analysts surveyed by Bloomberg, inventories of oil in the United States last week, again to update the record, an increase of 3.3 million barrels in the background of the maximum production volumes over the past three decades.

- Most likely, stocks in the United States will continue to grow for some time. Normalization of supply and demand balance in the market should not wait until the second half of the year. - says CIBC World Markets analyst Katherine Spector.

Many experts suggest that in the medium term, the price of Brent crude oil will be in the range of $ 50- $ 60 per barrel, after which the decline in oil prices will continue. However, as head of the company's Standard Chartered Research on the sale of raw materials, Paul Horsnel, reckons, oil has significant potential for growth.

In his view, the most likely scenario is a rise in prices for Brent crude to $ 100 a barrel, and WTI - up to $ 93 per barrel already in 2016.  

It is worth noting that Horsnel at the end of 2014 noted that the decline in oil prices will cause a reduction in cash flow and tightening credit conditions that will result in a significant drop in the volume of drilling in the next two months.

He predicted that the conservation value of a barrel of oil at a low level in the first quarter of 2015 would have lead to stopping the growth of the production of shale oil in the US, which is likely to happen in April. According to the Energy Information Administration (EIA), in April, production growth in the shale deposits in the United States will almost stop.

He also expects the price of gold in 2016 to be increased to $ 1,330 per troy ounce, while the cost of one ton of copper will reach $ 7250.

As estimated by US Department of Energy, volumes of increasing the production of shale oil fell to its lowest level on the background of a sharp decline in the number of active drilling rigs in the fields.
Energy Information Administration at the US Department of Energy (EIA) published a report with projections of performance of oil and gas in the United States.

The report notes that in April 2015 increasing in production of shale oil in the US will be only 1 thousand. Barrels per day compared to April 2014. Bloomberg says that it will be the lowest price since February 2011.

EIA analysts track changes in the productivity of oil production in seven major US shale formations - Bakken, Eagle Ford, Haynesville, Marcellus, Niobrare, Permiane and Utica.

The share of oil shale projects, developed in these formations, accounted for about 95% of the increase in production of shale oil in 2011-2013. According to EIA, on a monthly basis the net production of shale oil in the US will decline.

In April, the Bakken will produce eight thousand barrels per day less than in March; ten thousand less in the Eagle Ford and in Niobrara - five thousand. In this case, the simultaneous decrease in production of shale oil in the Bakken and Eagle Ford will occur for the first time from January 2009.






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