Crude Oil Price Forecast: What to Expect by the End of the Year
Fluctuations in the price of crude oil have always affected the economic and financial status of countries around the world. High crude price has led to a positive economic outlook for oil exporters. On the other hand, countries only buying oil imports suffer. Thus, financial institutions, governments, consumers, and investors closely monitor oil prices.
In July 2015, the oil price was at an average of 55.87 usd per barrel. This decreased to 45.07 usd per barrel in July 2016. However, it quickly rebounded during the second quarter of this year, as shown in the crude oil live chart. Still, the volatility of oil price does not hinder leading international agencies from making sound predictions. Here are some of those predictions:
- World Bank Prediction: Decline in Commodity Index
The World Bank initially estimated that there would be $41 per barrel this year. However, on its latest commodity forecast report, it has raised its 2016 estimated price for crude oil to $43 per barrel. This might be because of the extinction of commodity oversupply and the increase in demand for oil in the second quarter.
Oil prices have duly jumped by 37% in the second quarter of the year not only because of the previously stated reasons but also because of supply outages like the sabotage of oil infrastructure in Nigeria or the wildfires in Canada. According to John Baffes of Commodities Markets Outlook, crude inventories still remain large, so it will take time before they are fully drawn down.
Despite this recovery in oil price in the second quarter, World Bank still expects a decline in commodity index by the end of the year.
- International Monetary Fund Prediction: Restricted Investment
Oil prices have significantly declined since September 2016 due to the increased production output by members of the OPEC. Due to this, Futures market is suggesting that there will only be a slight increase in oil price in 2016 to 2017. If the decrease in oil price continues, there will be a restriction on the investment of mining structures and equipment.
- Global Forecasting Service Prediction: Output Freeze
The live oil price is still continually searching for a clear direction. With the downward pressure coming from oversupply and excess stocks countered by speculation that Organization of the Petroleum Exporting Countries (OPEC) will start to secure oil output in the future, Global Forecasting Service stated that an output freeze is not far from happening. The oil price has slipped back to $50 per barrel on September 10, 2016, and has triggered Russia and Saudi Arabia to join Latin American members of OPEC in expressing their concern about the effect of low oil prices in the stability of the market in the long term. Iran is also warming up to the output freeze idea.
On the other hand, the Economist Intelligence Unit (EIU) remains that the freeze will not be initiated this year as neither Iran nor Saudi Arabia is rushing to address the issue. Moreover, there’s a high possibility that oil price will go up by the end of the year or at the start of 2017.
Crude oil prices will continue to significantly affect the global economy and private financial institutions. Thus, knowing this commodity’s forecasts will be able to help governments, investors, and even consumers.
Guest Author: Irit Rutenberg