Expectations of a modest but significant global economic recovery coupled with the US production slowdown may give the much needed support to oil price, which experts say will trade in the $60-70 a barrel price range by end-2015.
Brent crude prices slumped below $50 a barrel in January, having fallen off the cliff from highs above $110 in June before recovering to levels around $60 a barrel in February.
Crude prices have declined on the back of new supplies hitting markets, in particular from shale oil production in the US, and slower global economic growth worldwide.
Global oil prices have slumped due to a combination of oversupply and tepid demand. Opec’s decision not to cut production in October last year also had an impact on the market.
But many industry experts now believe prices and volatility would cause US shale oil producers to stop new capacity additions and lead to a decline in existing shale oil capacity.
Another view is that the low oil prices could now begin to stimulate the market. The low prices seem to have kept demand, and that has supported the crude oil market, particularly in energy-starved countries such as China and India.
Despite slower growth, the two major emerging economies – China and India have not yet reported a significant drop in oil consumption, which ought to prop up oil prices and a respite to exporters.
Experts also believe that the international oil companies (IOCs) will maintain production targets through greater operational efficiency, even with lower capital expenditure, despite oil prices trading in the current price range and the resulting volatility on the development of new energy capacity over the short to mid-term.
This was revealed by a survey conducted among 160 Qatari and international leaders from government, academia and the energy industry by Gulf Intelligence at its energy forum in Doha last week.
Some 42% of the survey respondents had expressed the view that Brent crude was expected to trade in the $60s-a-barrel range at the end of the year, while 38% thought prices were more likely to be at $70s at that point. But only 6% predicted Brent would trade above $80 a barrel by year-end.
Having bottomed in the second quarter of 2014, global oil demand growth has since steadily risen, with year-on-year (y-o-y) gains estimated at 1mn barrels per day (bpd) for the first quarter of 2015, the Paris-based International Energy Agency (IEA) said.
The forecast of demand growth for 2015 as a whole has been raised by 75,000 bpd to 1mn bpd compared with the last report and the 680,000 bpd growth seen in 2014, bringing global demand this year to an average of 93.5mn bpd.
Going forward, the oil price will also depend on major currencies other than the dollar, on which the commodity has been priced.
If such currencies including the yen appreciate against the dollar, oil and other commodities will become more appealing to buyers, especially non-dollar currency holders, it is pointed out.