business
Survey shows oil prices could rise to US$70 by 2020
A survey participated by some 2,500 energy professionals working in oil and gas, banking, hedge funds, research, professional services, trading and specialist media shows that oil prices are expected to rise in the next five years. – Reuters file pic, March 8, 2016.Oil prices are expected to rise gradually over the next five years but will remain well below the pre-crash level, according to a survey of professionals who follow the oil industry.
Brent prices are expected to climb from an average of US$40 (RM163) per barrel in 2016 to between US$65 and US$70 per barrel by the end of the decade.
The price expectations are based on an email survey sent to more than 2,500 energy professionals working in oil and gas, banking, hedge funds, research, professional services, trading and specialist media earlier this month.
More than 800 responded. The results are more bullish than the futures strip, where Brent is currently trading around US$50 per barrel on average in 2020.
In the survey, there is a high degree of consensus about prices for the rest of 2016. Most forecasts for 2016 are tightly clustered between US$35 and US$45 per barrel. Nearly all lie between US$30 and US$50.
Brent prices have averaged just US$33 per barrel so far in 2016, so most respondents expect prices to be slightly firmer in the remainder of the year.
But in the latter years covered by the survey there is far less consensus about what will happen, reflecting uncertainty about how far and how fast prices might recover from the crash.
The central forecast rises progressively by US$5 to US$10 per year between 2017 and 2020, but the range of expectations also becomes successively more dispersed.
Most respondents expect prices to rise to around US$65 to US$70 per barrel by 2020. But as many as a quarter think prices will remain stuck below US$55, while another 25% think they will have risen to more than US$80 by then.
One way to measure the increase in uncertainty is to look at the standard deviation of survey responses over longer time horizons.
The standard deviation of responses grows from less than US$8 for 2016 to US$20 by the end of the decade, suggesting uncertainty about prices at the end of the decade is almost twice as great as in the near term.
For 2016, 90% of forecasts lie in a US$20 range from US$30 to US$50 per barrel, but by the end of the decade the comparable range is US$60 wide from US$40 to US$100 per barrel.
Despite market chatter about a looming supply crunch as a result of cuts in investment spending, only 7% of respondents expect Brent prices to climb back to US$100 or more by the end of the decade. – Reuters, March 8, 2016.
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