Northern Trust’s chief economist has cast serious doubt over the possibility of a significant oil price recovery this year as the ongoing price war continues.
Carl Tannenbaum warned that such is the oversupply of oil at the moment it is “almost impossible” that prices will recover to $50 by the end of the year.
Crude oil prices continued to hover around $30 a barrel yesterday after prices saw their third biggest daily fall in eight years earlier in the week.
The “pain” oil producers are feeling as they compete for global market share will eventually lead to a compromise being found but not for quite some time, the former Federal Reserve vice president predicted.
“I believe producers are feeling so much pain that they’ll eventually come together and get the price back to a more normal level,” Mr Tannenbaum said.
“I don’t see that happening this year, the supplies of crude that are sitting around are so large it’s almost impossible to think that Brent will be back at $50 by the end of the year.”
Prices recovered slightly yesterday as reports suggested the Organization of the Petroleum Exporting Countries countries were considering freezing production levels in an attempt to curb the growing glut of oil, but remain only slightly above the 12-year low of $28 a barrel seen last month.
In a sign that the fight for market share is continuing though, Iran offered crude supplies to Asia at a discount to their rival Saudi Arabia.
Tullow Oil chief executive, Aidan Heavey was somewhat more optimistic than Mr Tannenbaum when announcing losses of $1.04bn for 2015 earlier in the week in predicting oil prices could recover to between $60 and $65 per barrel in the second half of the year.
Mr Tannenbaum also said he did not anticipate China would have “a disastrous hard landing” given the huge dollar reserves it has to stimulate its economy.
He warned, however, that the task of refocusing its economy on services as opposed to manufacturing was a significant challenge, adding that it took the US almost 100 years to change its economy from being 70% manufacturing, mining and agriculture to 70% services.
Oil price, February of year
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