Analysts Divided On Oil Prices
Oil prices have undergone a serious fallout since the middle of last year.
Tuesday, February 10, 2015 - 00:00
Recently, prices have shown small signs of recovery. But some analysts believe the lowest levels are yet to come.
According to Citigroup, oil prices might reach as low as $20 per gallon, MarketWatch reported. The firm sees the small oil rally as something like a bump on the way to lower prices. The $20 per gallon level would be oil’s lowest cost since 2002. Citi reduced its forecast for 2015 WTI prices from $55 per gallon to $46, and its prediction for 2015 Brent crude from $63 a barrel to $54.
With that said, West Texas Intermediate oil for March delivery closed 2.3% higher on Monday. Wall Street opened higher Tuesday morning despite the bearish sentiment toward oil. The S&P 500 gained 0.54%, the Dow added 0.57% and the Nasdaq added 0.66% in early trading.
Some unconcerned by the oil slide
Not every analyst is convinced the oil glut is set to continue. According to The Wall Street Journal, the International Energy Agency reported oil output in the US may soon decline. A decrease in production would lead to a price recovery. The IEA pointed to spending cuts by American oil producers and a drop in the number of crude drilling rigs as indicators of a production drop.
In a different report from OPEC, the oil cartel predicted its demand would increase in 2015 which would also push prices higher. That’s good news for producers, especially in the US, as producers have trouble maintaining output when prices are low.
“There are strong indications that US shale producers are taking a hit, and by the second half of this year a lot of marginal barrels will disappear from the market and demand will rise for OPEC members,” an OPEC official told the Wall Street Journal.
It remains to be seen which direction oil prices will head, as even expert analysts disagree on the price bottom. Investors should keep themselves informed and carefully follow the latest predictions and numbers coming from oil analysts.
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