The price of a barrel of Brent crude is expected to reach $60 by the end of the year – according to at least one economist.
Carl Paraskevas, senior economist for the Bank of Scotland said the lender’s house view was that the price of a barrel of oil would start rising, driven by a fall in production of oil and gas.
Speaking at an event in Aberdeen yesterday, Paraskevas added: “There has also been a marked pick up in demand,” he said. “Chinese imports of crude are up and seems relatively stable.”
The bank’s prediction came as oil prices climbed to their highest in three months last night after another oil forecaster predicted prices would climb to $75 over the next two years.
Brent crude oil futures closed up $1.72 at $53.05 a barrel after PIRA Energy Group, a closely watched forecaster that predicted the collapse in oil prices a year ago, said it sees crude prices at $70 per barrel by the end of 2016 and $75 a barrel in 2017.
In Aberdeen, Mr Paraskevas was one of three speakers at the Economy Business Breakfast event hosted by the Aberdeen Chamber of Commerce.
Jann Brown, co-founder of an India focused oil company start up Magna Energy and formerly the managing director of Cairn Energy, declined to offer a prediction on oil price.
“I’m not an economist,” said the chartered accountant, who is also on the board of Wood Group.
“But I will say that oil and gas is an incredibly resilient industry that has been through downturns before and will come up again.”
In June her new firm Magna, which she founded alongside another former Cairn director, Dr Mike Watts, demonstrated that there was still investment available in the market after it raised £325million from private equity giant, the Carlyle Group.
Her advice to the audience was not to focus on just the price of oil.
“Keep your cost of capital as low as you can. Keep your costs low. Finally, make sure to try to get into exciting markets like India, where there is massive growth in the economy and huge demand for your product,” she said.
Mark Berrisford-Smith, head of economics in the UK for HSBC offered a different sort of prediction – that interest rates in the US would rise, prompting rates in the UK to rise in February.
He added that low oil prices was
“I know it is bad news for Aberdeen, but it has been the best thing for the economy in recent months. Oil at half the price has put inflation down to zero.”
Low inflation in the UK has in turn boosted consumer confidence, where consumer spending accounts for 65% of British GDP.
He said that currently, the UK economy was “about as good as it gets”, particularly when compared to economies in the eurozone. But he said the Bank of England Monetary Policy Committee should press ahead with hints for raising interest rates despite the global economy remaining still “semi-comatose” after the 2008 economic crisis.
“One very good reason to raise interest rates: it would be nice to have ammunition for when the next downturn comes. It always does come.”
Read here to see whether three leading experts agree with the prediction.
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