As the oil price rally paused for breath yesterday, industry specialists are claiming that the market has bottomed out.
Fatih Birol, executive director of the International Energy Agency is reported to have said that “the price direction is rather upwards than downwards” and that investment in the sector globally is set for a rebound in 2017.
Brent crude dipped but hovered above $46 on the UK bank holiday Monday, as reports revealed Opec production had been maintained at near record highs in April.
Wood Group founder Sir Ian Wood said: “I think there’s probably a feeling that we’re seeing the bottom of the oil price.
“I think the indications are that various producing countries around the world are beginning to face some really big problems. Not necessarily because it costs a lot of money to produce oil, but because their economy is based on $50 $60 oil.
“Certainly I have more confidence that into 2017 and 2018 we’ll see the oil price back at $55, $60, $65 and that’s a big, big difference from $30, and a big difference from $40.
“I think it will begin to get heads up again. I think they’ll be plans pulled out to look again at some the new field developments.”
He added: “We’re past the worst. Having said that I think the rest of this year is going to be pretty horrible and there will be more job losses in 2016.”
Ann-Louise Hittle, Head of Macro Oils at Wood Mackenzie, said the analyst has been forecasting a tightening in the oil market supply and demand balance for the second half of 2016 since late 2015
She added: “For months, our Macro Oils service has shown world oil demand surpassing total supply by the fourth quarter of 2016. On this basis, our view has been and remains that the oil price low was established in January 2016 when Brent fell to $26 per barrel.
“We expect oil prices to rise in 2016 and again in 2017 as the effect of low oil prices on supply continues.”
There are still those who are cautious about being a hostage to fortune when making calls about oil price.
Jamie Stark, a partner with Burness Paull, said delegates at a conference the law firm hosted a year ago were asked to give their opinion on where the oil price would be in April 2016.
“They were an august bunch – delegates representing the whole supply chain, its funders, advisers and economists,” said Mr Stark.
“We will reveal the full results at our upcoming conference in May but, to illustrate my point, I can tell you that not one of the hundred plus of our erudite delegates’ prediction for the oil price today fell into the $40 to $50 bracket. Not one.
“So my view then is that, for the sake of the industry, I hope we are seeing signs that the market is finally on a more settled and upward path. And that with renewed confidence, the capital investment that is so needed for a sustainable future will closely follow.”
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