Oil price rebound?

Some analysts and pundits believe that oil prices will rebound a bit in the short to medium term. That’s the message Dave Pursell of the energy investment bank Tudor, Pickering, Holt & Co. (TPH) delivered at a recent industry breakfast. TPH research predicts an upturn in the first quarter of 2016, with prices rising to the $85-bbl. range. Barclays agrees, while slashing its 2015 Brent crude oil price forecast to $44 bbl. from $72 bbl. in early February, that an oil price recovery is possible next year. Barclays’ Michael Cohen, in a note to clients in late January, said, “We expect to see further downside to prices in the next few months, with both WTI (West Texas Intermediate) and Brent likely to trade in the high $30s before the oil price decline is arrested.” Barclays notes that although rig counts in North America are falling, production is not being cut fast enough to bring the oil market back into balance in the short term. In line with TPH, Barclays looks for a moderate price rebound in 2016.

OPEC, whose refusal to cut production has exacerbated the current crisis, is a bit more optimistic. At an early February meeting at OPEC’s Vienna headquarters, OPEC delegates told Reuters that oil prices might stay depressed until summer due to weak seasonal demand. The delegates noted oil prices could slip as low as $30-$35 bbl. due to weak demand combined with refinery maintenance in the first and second quarters. With decreasing stocks due to falling shale production, OPEC is somewhat hopeful of a return to higher prices beginning in the second half of 2015.

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