Petroleum: in just a few years it may be worth less than water

Petroleum: in just a few years it may be worth less than water

Elisa Maria Giannetto
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According to the forecasts of some analysts, the price of oil could fall below that of water, thwarting OPEC's efforts to implement production cuts

In just a few years' time oil could be worth less than water. This alarming prediction made by some analysts appears to be confirmed by the observation of the run of market prices over the past few weeks. After attempting a recovery, following the meeting of the US Fed last week, today prices are dropping again, according to experts inaugurating a new bearish trend for oil prices, which will find it tough going to stay above 48 dollars per barrel. At the inception of OPEC agreement, where countries agreed to reduce crude oil production, prices skyrocketed, while remaining confined within a range that never reached the rate of 60 dollars per barrel. But many analysts were immediately sceptical as to whether the deal could actually stabilize the oil market. Prices were also kept under pressure by the increase in US output, where drilling and mining activities have been accelerated. According to EIA data, US production has increased by 400,000 b/d over the previous lows, with an additional continuous increase in reserves. According to EIA forecasts, in a few years oil prices will witness a market featuring excess demand and a shortage of supply. The EIA's forecasts are similar to those of Goldman Sachs, according to which the market’s rebalancing is already underway. But not everyone agrees. Other experts are convinced that supply and demand will balance out within 6 months, though a recent analysis by CNBC pointed out that similar forecasts were already made six months ago and quickly proved themselves to be inconsistent. According to the most pessimistic however, oil prices will not rally and price listings will be worth even less than basic commodities such as water.