Bull or bear? The oil market is impossible to forecast

Bull or bear? The oil market is impossible to forecast

Elisa Maria Giannetto
Share
A heated debate at International Petroleum Week in London places crude prices anywhere between $70 and $30 a barrel

Will oil prices rise or fall in 2017? The familiar debate between bulls and bears was the subject of many of the talks at London’s International Petroleum Week. Forecasts at the event ranged from as high as $70 a barrel and as low as $30, depending on whom was asked. Optimists include Citigroup analyst Edward Morse, who believes the price per barrel is unlikely to diverge from the $53-58 range in the short term, but that there could be ''rapid rebalancing over the course of the year'' as the OPEC cuts take effect, and in light of Iraq’s recent request to hold a new summit to agree on further cuts to sustain the price recovery. On the other side of the debate, pessimists see the USA’s race to expand production and stockpiles as the main force keeping prices down. Another argument in their favor is the fact that, even though the average price per barrel has held stubbornly between $50 and $55 per barrel, traders have been betting heavily that they will keep rising. This imbalance exposes the market to sudden, violent changes precipitating a drop in crude prices. According to the Financial Times, this could create a bubble in the commodity that will burst once traders realize they are all betting on the same horse. What’s more, the OPEC deal is precariously reliant on the continued cooperation of non-OPEC members. In order to shore up some of that risk, OPEC secretary general Mohammed Sanusi Barkindo is pushing for higher levels of compliance by those countries. While the mantra a year ago was ''lower for longer'', with the current reigning uncertainty it has been replaced by ''wait and see''.