MOSCOW (Sputnik), Daria Chernyshova — The oil price has found a new equilibrium with a barrel of crude averaging $55, experts told Sputnik news agency Tuesday as conflicting projections for oil futures ranging from $20 to $55 per barrel are released.
"We expect prices to average around $55/barrel this year. We expect that as investment is cut back and rig counts fall in North America, that prices will rise through the year," Kiran Ahmed, an economist with Oxford Economics told Sputnik.
Similar projections have been made by Emilio Rossi, the president and founder of EconPartners, an independent consultancy firm, who explained the balance by a plateau in the United States.
"I think that the oil supply in the US has reached a plateau so I would not expect an imbalance in the market," Rossi told Sputnik. "We have reached a new balance in the market — in demand and in production. The weakness in demand has already expressed its impact, there is a weakness in the global demand for oil in terms of economic growth."
Rossi stressed that since economic growth has been weak, particularly energy intensive states such as China and other emerging economies, consumption has decreased, making a push from the demand side very unlikely.
"I think it is going to be more or less stable. At the same time production is not going to change much from now. So the 55 price is right," Rossi said.
This week saw the publication of two reports with oil price assumptions. The International Energy Agency's (IEA) annual Medium-Term Oil Market Report (MTOMR) assumes that oil prices will hit $55 per barrel in 2015 and $73 in 2020. While Citigroup's projections are very different and state that the price of a barrel of WTI oil will fall to as low as $20 per barrel "for a while" in 2015.
"By 2020 we expect prices to average $85/barrel. Prices are expected to rise through the medium term as demand slowly picks up and investment cutbacks taking place now gradually tighten the market," Kiran Ahmed told Sputnik.
However, Emilio Rossi believes $55 is as fair in the long run as it is in the short-term, though long-term projections are hard to make due to many factors affecting oil prices.
"I think it is going to be more or less stable. Shale oil will be available in the next several years. There is a lot of shale oil production that is still profitable even at the oil prices of now. A big portion of the shale oil production is still very sustainable at the current level, so I expect that production is going to be at the same level. So the area around 50 dollars is quite sustainable," Rossi said.
Since June 2014, global oil prices have dropped by about 50 percent due to oversupply in the market. The Organization of Petroleum Exporting Countries' (OPEC) decision in November 2014 not to cut oil output levels contributed to a further slump in prices.
