Brent crude futures held above $48 per barrel this morning as a weaker dollar offset the impact of a global supply glut, with traders questioning if the nearly 60% price drop since June has run its course.
As Reuters reports, Brent hit $45.19 on Jan. 13—the lowest since 2009 and down from a June 2014 peak of $115.71—but since has traded in a narrow band of $47-$50.62.
“The market is looking for the right momentum to push oil prices higher,” Hans van Cleef, senior energy economist at ABN Amro bank in the Netherlands, says. But he adds that the slightly rise in Brent this morning does not necessarily mean the rout is over.
“We’re still closing lower every week compared to the week before,” van Cleef said.
The rapid drop in oil prices is driven by ample supplies from the U.S. shale oil boom and a decision by the Organization of the Petroleum Exporting Countries not to cut output quotas. OPEC Secretary-General Abdullah al-Badri said on Monday that oil prices may have reached a floor and warned of a spike to $200 a barrel if investment in new supply capacity was too low.
Analysts were more bearish. Swiss bank UBS predicts it could take several years for prices to recover as it lowered its 2015 forecasts for Brent to $52.50 a barrel and WTI to $49 a barrel.
“We do not forecast oil prices to reach $90/$85 Brent/WTI until 2018,” the bank says in a note to clients. Read the full story.
