Oil prices to decline further in 1H16 - BBVA

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 29, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Research Team at BBVA, suggests that market fundamentals are behind oil prices drop and further declines are likely.

    Key Quotes

    “We expect a modest rebound in 2H16-2017 with long-run equilibrium price at around $60/bbl as structural trends limit upside risks. Our new baseline scenario implies downward revisions to the short-run with a gradual recovery thereafter.

    Oil prices to decline further in 1H16 because of

    • OPEC reluctance to cut production - Given OPEC’s low production costs, further price declines cannot be ruled out.

    • Additional supply from Iran - Despite the drastic correction in prices, excess supply persists while inventories remain at all-time highs.

    • Resilient U.S. crude production - Resilient non-OPEC production exerts downward price pressures.

    • Dollar appreciation

    • Concerns on weaker economic growth”
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