The current oil market has been described as Jekyll and Hyde-like by some experts. Meanwhile, the average American consumer is perpetually shocked by how low gas prices have fallen at the pump. If you’re in the latter category, then we have good news — financial analysts say oil prices will stay low through 2016. That means you can fill up your gas tank for just $2 a gallon in some areas.
But the projection is bad news for the oil market overall, as well as related enterprises. Still, the news wasn’t completely unexpected. So looking ahead, what can we expect from the oil market over the next 15 months?
Experts say oil and gas prices have hit a new floor. Prices are not likely to fall much further, but they will stay at the new bottom throughout 2016. That’s what the Wall Street Journal thinks, anyway. The newspaper conducted a survey of 13 investment banks about their projected prices of crude oil next year. In August, many major banks tepidly predicted that oil prices would nudge upwards next year, but those predictions have been watered down this month. On average, those 13 banks said they expect crude prices to hover around $58.70 a barrel in 2016.
Unfortunately, not everyone is quite so optimistic. Goldman Sachs expects crude to remain below $50 a barrel for all of 2016. And as if that wasn’t distressing enough, the bank also has a worst-case scenario projection that would see prices fall to a mere $20, a likely catastrophic scenario. This year, prices have been below $50 since January, and as of September were at $49 a barrel.
So why are prices hitting the floor for the foreseeable future? The OPEC oil market cartel has committed to a high-supply policy. That could drive prices even lower as supply increases, but experts say that over-supply has already been factored into 2016 the oil industry predictions.
So until the U.S. pulls back its output, or until the global economy improves and drives up demand, expect oil prices to stay low. And again, while that’s welcome news for the average American motorist, oil and gas industry trends aren’t so great for the upstream oil and gas companies that need to turn a profit off their production activities.
