The Wildest Predictions For Oil Prices In 2016

Tyler Durden's picture

Submitted by Michael McDonald via OilPrice.com,

One reality in the markets is that despite the best efforts of analysts and traders, no one ever knows with any degree of certainty what will happen to the price of an investment in the future. Oil exemplifies that premise right now. All year there has been a tremendous amount of discrepancy in predictions for oil prices with some commentators looking for prices of $10 a barrel and others expecting prices near $100.

The median price predicted by analysts is around $46 a barrel for the end of 2016, but there is a lot of variation around that number. For instance, last year, noted economist A Gary Schilling suggested oil could fall to as little $10 a barrel. That proved to be a very prescient call – while oil hasn’t dipped quite that low, it did go down more than almost anyone expected versus last year. Even with prices rebounding some at this point, companies are not making money on oil at current prices. Instead they are continuing to operate in the hope that tomorrow will be better.

It’s not just individual economists who are concerned either. A couple of months ago, Natixis SA, a Paris-based bank lowered its forecast for crude in 2016 and 2017 on concerns about Iranian production increases. The bank believes crude will average $38 a barrel in the fourth quarter of the year with the world still drowning in oversupply.

Part of the recent oil bullishness has been driven by increased oil supply disruptions which Goldman Sachs among others sees helping to alleviate the daily production glut which has been a market reality over the last two years. Despite that, some analysts are still of the view that the current level of “high” prices could be short lived, with Saudi Arabia and Iran both preparing to ramp up production and the hit to output in Canada due to wildfires being quickly resolved.

What’s more, oil prices could be headed lower if the Fed raises rates in June. That scenario now looks increasingly likely thanks to inflation that is stronger than many have been expecting and an economy that is at least stable though not strong. Certainly by comparison to moribund Europe and the increasing problems on almost everyone other continent from South America to Asia, the U.S. is looking very strong. As a result, if the Fed hikes rates, it will result in a stronger dollar and a weaker relative demand for oil. BNP Paribas for instance is citing $50 oil as being too expensive, with oil having moved too high too fast. Increasing crude stock piles aren’t helping either.

Still there are reasons to be bullish about oil as well. Goldman Sachs has come out recently with a bullish call on black gold, citing major supply disruptions in Venezuela, Nigeria, and China which the bank believes will sharply lower production levels. U.S. rig counts are also still falling, with the number of oil rigs in the country down by more than half in the last year. In the short term, U.S. producers have been able to hold up production by drilling their best rocks, but that situation won’t be sustainable in the long run.

On the whole there are reasons to be bullish and bearish about oil, and there are plenty of analysts taking each side of the trade. Where the market goes from here though is anyone’s guess - so investors should be prepared for either eventuality.

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jus_lite_reading's picture

Long deep sea drillers and oil!

StackShinyStuff's picture

I can go wilder on my predictions.  $1000.  Or $0.  How's that for wild?

El Viejo's picture

$20 a BBL then war in the East.

FreeShitter's picture

Stop guessing, stop trying to speculate....oil will be wherever the banks want it. Its a another policy tool.

KnuckleDragger-X's picture

It'll work for awhile anyway. There is a reason there are no windows or clocks in a casino.......

nibiru's picture

If they can do it with gold and other pms why they couldn't do it with oil? 

GUS100CORRINA's picture

The Price of Oil is strictly determined by the FAKE, FAKE, FAKE /CL futures ... period. Has anyone looked at the application www.marinetraffic.com lately? Gulf of Mexico and waters around Singapore look like a PARKING LOT full of oil tankers that are the size of Noah's Arc or bigger. 

Who authorized the CBs to be in the futures market manipulating price of oil because G-SIFIs are in trouble with loans?

Truth and Honesty are dead in the streets!!!!

de3de8's picture

Will go to $10 only after Telsa at 500k+ units annually

Kakistocrat Radar's picture

Analysts' heads are up their collective anuses. Conventional wisdom is out the door when assessing extracurricular manipulation.

Funny that Iran production is mentioned as a key addition to the glut- but no mention of the alternative energy cabal in Silicon Valley or the Qatar funded Brookings Institution pulling the Obama Admin strings so hard to get the Iran nuke deal/oil sanctions lifted.

Arnold's picture

Alt.eng will implode at any time.

Scandal pervades.

 

https://americansforprosperity.org/39393-2/

et cetera

thecondor's picture

"no one ever knows with any degree of certainty what will happen to the price of an investment in the future. Oil exemplifies that premise right now." Oil is not an investment. It is something people use to gamble on. People use to to "make money" and "people" are irrational thus causing volatility in the oil markets and not allowing true price discovery. And who gets fucked? we do!

nibiru's picture

+1, Also it's funny how if the price goes up they announce Shale producers will start pumping - adding another boatloads to the mix and then price should go down right? aaaaand it will continue growing slowly. Unless energy sector will beg the FED for bailout being jealous of banks in 2009. Janet are you ready to print?

BorisTheBlade's picture

That is maybe counterintuitive, but low oil prices actually add to supply in this market as oil producers try and make up the loss of revenue with added volume. It will come back and bite everyone in the collective a$$ as new investment is not being made given there's no predictability of future oil prices and new resources are increasingly more expensive to bring online.

pebblewriter's picture

I'd go further than that.  For the past 4 months, especially, oil has been merely a tool to drive stocks higher.  If you have a big stock portfolio, you're probably okay with paying a little more at the pump.  If not, congratulations.  You're helping to support the net worth of the folks who do. 

http://pebblewriter.com/whats-fueling-the-rally/

venturen's picture

Yellen, Carney, the central banker cabal exhumed Adam Smith body and drove a stake through the heart to Adam Smith then performing a Keynesian Voodoo ritual to attempt to kill the law of supply and demand. We will learn that it didn't work in a couple years....when there is an oil lake in Cushing, when there is no toilet paper or electricity at night....because as with Venezuela, economics always wins in the end! 

falak pema's picture

Ever since the Seven Sisters were born in 1928 to control the oversupply of oil in USA and in Baku (red line agreement), the oil energy runs the world and its NEVER been a question of supply and demand but a question of BIG POWER games played around Oligopolistic control of key energy.

An energy that has spawned the modern world post 1945 victory and sunk it subsequently in petrodollar debt based on a monopoly money system dripping in oil; Pax Americana's past life line now become its own hangman's noose!

Don't blame it on Ben and Yellen, its goes back to the birth of Rockafella, Mellon and JPM monopolies of Teddy Roosevelt's age, that saw the demise of Pax Britannica and the rise of the model T and what it meant; under the auspices of the all mighty FED controlled by an Oligopoly that built Pax Americana.

Those who drove a stake into the heart of Adam Smith were the capitalists from day 1. And that is the true contribution of the USA to this day and age : Monopoly no holds barred militarist control of OIL that runs our world.

QED.

Until we change the energy paradigm and the money monopoly of 1% based on cancerous debt.

Chuckster's picture

I think when it's discovered that a crude oil enema can extend life expectancy several years the price will go over $100 a barrel.  The enemas will be orchestrated for free for dislocated delusional welfare recipients.

pebblewriter's picture

No idea where it'll end up on Dec 31, but I'm pretty sure it'll continue to rally -- at least during market hours -- every day the stock "market" needs to be propped up.

http://pebblewriter.com/back-to-plan-a/

worbsid's picture

Three clues: 1. US uses about 19 million barrels equivalent of petroleum products per day and produced a little more than half that amount. 2. The idea of us petroleum independence is out of the question. 3. We do live on a fixed planet (duh).  

Monteriano's picture

It should be obvious that demand has nothing to do with price. The money masters control will the price of every commodity until they can't.