Posted on 05/02/2015 5:28:53 AM PDT by thackney
Market participants expect the price of Brent to average around $75 per barrel through the rest of the decade, not much above the current level.
Spot Brent prices have risen around $20 per barrel from their mid-January low, from $46 to $66, an increase of more than 40 percent.
Over the same period, however, futures prices for oil delivered at the end of 2017 have increased just $4.50 per barrel and remain semi-fixed a little over $70.
As spot prices have risen, the slope of the forward curve has become flatter, ensuring prices for 2017 and beyond are almost unchanged (http://link.reuters.com/jyr64w).
Analysts tend to cite the curve selectively, quoting it when it coincides with their own view and ignoring it when the curve is at variance with their forecasts.
In any case, the forward curve is a notoriously poor predictor. Back in June 2014, it pointed to an oil price around $100 per barrel at the end of 2017. There is no evidence the market can successfully anticipate prices more than about 6 months ahead.
And the curve is not a consensus forecast. The curve is what traders bet against. There will be as many traders who believe prices will be above the curve as below it. For a market to exist there must be uncertainty and a diversity of views.
That said, the curve can provide some indication about the state of market views on average. At the moment it indicates many market participants think oil prices will trade around $75 for the next few years.
That level corresponds roughly to most estimates of the breakeven price needed to sustain modest growth in global oil production.
Published estimates by industry sources range from a marginal cost of $55 or $65 to as much as $75 or $85 per barrel.
(Excerpt) Read more at rigzone.com ...
Predicting oil prices a decade out is tom foolery
The first incidence of a vessel sunk in the Straight of Hormuz will spike the slope of the curve toward heaven
At $60-$70, rigs will be drilling new wells now. The oil companies have fine-tuned their operation to be much more efficient in using the new technologies developed in the past five years. We should take the middle-east out of our supply pipeline now. Paying a little more for our domestic energy development is much better than relying on enemies for oil.
I guess he thinks there will be no wars in the next ten years, or the global economy will not improve for the next ten years.
Wait until a new president is elected. If it is a republican that turns back the punitive regulations and taxes of the Obama administration, our economy will skyrocket and the supply of oil will lag demand, causing process to go back over $100/barrel.
I doubt that. Yes, a Republican POTUS and Congress could deregulate and cut back on punitive taxation, and that would juice the economy.OTOH there are a LOT of shale wells which have been drilled but not yet completed. Therefore the response time of shale oil/gas production would be the time to ramp up the completion of existing wells, not the time to get drilling rigs in place.
The other thing which could/should be done would be to take the export “sanctions” off of American oil/gas exporters. That would cut into the Saudi system of exporting to America cheaper than they export to Japan and others who can’t “Drill, Baby, Drill.” That would immediately bump up the price American producers can get for oil, thereby immediately incentivizing an increase in shale production. Unless the Saudis cut their price to Japan . . . which, either way, would tend to improve Japan’s economy.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.