Oil Prices Will Eventually Rebound

Oil prices will eventually rebound as current levels are below the marginal cost of production for the majority of operators.

That’s what Jack Allardyce, an oil and gas research analyst at Cantor Fitzgerald Europe (CFE), outlined in a comment sent to Rigzone on Monday.

“Sub-$40 isn’t sustainable for any longer than a short period, most likely just months,” Allardyce said. The CFE representative also warned, however, that oil prices can “almost certainly” fall further before they go back up.

Standard Chartered revealed Monday that it has lowered its 2020 average Brent oil price forecast by $29 per barrel to $35 per barrel.

The company, which believes the collapse of the OPEC+ agreement will lead to a “severe and extended price war”, lowered its second quarter Brent forecast by $38 per barrel to $23 per barrel and its 2021 forecast by $23 per barrel to $44 per barrel.

OPEC+ is going to war with U.S. shale, according to Sandhill Strategy co-founder Katie Bays, who expressed the view in a television interview with Bloomberg on Sunday.

Commenting on the path of oil prices, Bays told Bloomberg that the floor is “kind of up for grabs because what the market is trying to figure out now is how low do crude prices have to fall to discourage U.S. producers from pumping more oil”.

OPEC held its 178^th extraordinary meeting last Thursday and ended up proposing a further 1.5 million barrel per day production cut until the end of 2020. The group met with non-OPEC counterparts to try to finalize the deal on Friday, but no agreement was reached.

Prior to the OPEC+ meeting last week, Rystad Energy, Fitch Solutions Macro Research and the U.S. Energy Information Administration all cut their 2020 Brent oil price forecasts.

CFE describes itself as an integrated, full-service investment bank. The company is headquartered in London.

To contact the author, email andreas.exarheas@rigzone.com