Crude-oil prices remain under pressure and now linger close to January lows. A perfect storm has hit the oil market but we emphasise three factors in particular which have delivered bearish surprises this year.
First, oil markets are struggling to adjust to a 'new normal' where prices are less influenced by OPEC and more by market forces. Second, the shale-oil cost curve appears to have seen a marked downward shift recently. Third, OPEC continues to pump record-high volumes of crude. This new regime uncertainty has sent oil into troubled waters.
Mainly on the grounds of a significant downward shift of the crude-oil cost curve, we have lowered our crude price forecasts - also, we now project a more shallow rebound than previously. We now project average Brent prices at USD53/bl (previously USD61) in Q3 and see a small rebound to USD57 (USD69) in Q4 - we see average 2015 prices at USD57 (USD62) up to USD63 (USD73) in 2016. We recommend clients on the consumer side to exploit the current price levels to lock in 3-12M oil expenses.
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