03/31/2015
Global / Industry
We believe that gradually improving demand-supply fundamentals will lead to some recovery in oil prices, but it is extremely difficult to determine how fast or how far that recovery will be.
If only we could forecast oil prices with a simple demand-supply equation. Alas, it is far more complicated nowadays. While we believe that gradually improving demand-supply fundamentals will lead to some recovery in oil prices, it is extremely difficult to determine how fast or how far that recovery will be. There are many economic structural issues to consider as well as a maze of global geopolitical shifts, conspiracy theories, and potential acts of one-upmanship. That said, if history is any indicator, it seems unlikely that oil prices will reach pre-crash levels, at least in the near term.
In a report from DBS, we will highlight some of the big issues, including OPEC’s refusal to cut production, the resiliency of US shale oil production, China’s slowing demand, and the geopolitical risks ahead. We also look at others factors such as a massive inventory buildup around the world, the strong US dollar, structural changes in the global economy, and how oil companies are responding.
Here are a few key points from the report:
- Oil prices will recover over time as demand-supply fundamentals improve
- Oversupply, strong USD will keep lid on oil prices in first half of 2015
- We expect production cuts in the second half of 2015, supporting higher oil prices
To read the full report, download the PDF.
