End of 2015: What will happen to oil prices?

Baku, Azerbaijan, Dec. 25

By Vagif Sharifov – Trend:

The oil market testified a phenomenal fall in commodity prices in 2015 over the last 30 years. Since 1987 the oil price has never dropped as it happened this year by 47 percent compared to 2014. The similar decrease was recorded only in 2009 when the price reduced by 36 percent compared to 2008. For decades, only twice the oil prices reduced during three or more years in a row - in 1991-1994 and nowadays – in 2013-2015. In all other cases, an increase was always observed for a couple of years after the fall in oil prices. The maximum growth reached 60 percent in 2000 compared to 1999.

The oil prices over the last 30 years are as follows:

Many experts are skeptical about the great oil price recovery forecasts in 2016. Taking into account that the evident manipulation, rather than any free market mechanisms, has been observed in the sharp drop in oil prices from September 2014 up till now, many market participants think that the Brent price will average $ 53 a barrel in 2016. Although some individuals find this forecast too optimistic, believing that Brent may fall up to $15-25 per barrel.

Several factors may affect the fall in prices in 2016:

- The US, which will start supplying the WTI oil to the European refineries from January.

- Iran, which will likely to sell oil with a large dumping, given Tehran covered by international sanctions for a long time,

- The pressure from Saudi Arabia, willing to expand its market share even by reducing subsidies for the local market as a result of a decrease in dollar proceeds.

Brent price forecast for 2016:

Except for December, when on average the Brent price dropped up to $ 35 per barrel, this year the average price for this oil reaches around $53 per barrel in 2015. In fact, this is the lowest oil price over the last 10 years.

The average oil price has reached $ 91 a barrel a year since 2005, by permanently adapting the economies of many world countries to the high dollar income and expenditure.

The oil price projected for 2016, almost similar to that in 2015, hampers the state budgets of many world countries to be profitable.

A break-even point of the country’s state budget with the following oil prices:

Trend expert Vagif Sharifov

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