FXStreet (Delhi) – Research Team at BBVA, suggests that market fundamentals are behind oil prices drop and further declines are likely.
Key Quotes
“We expect a modest rebound in 2H16-2017 with long-run equilibrium price at around $60/bbl as structural trends limit upside risks. Our new baseline scenario implies downward revisions to the short-run with a gradual recovery thereafter.
Oil prices to decline further in 1H16 because of
• OPEC reluctance to cut production – Given OPEC’s low production costs, further price declines cannot be ruled out.
• Additional supply from Iran – Despite the drastic correction in prices, excess supply persists while inventories remain at all-time highs.
• Resilient U.S. crude production – Resilient non-OPEC production exerts downward price pressures.
• Dollar appreciation
• Concerns on weaker economic growth”
(Market News Provided by FXstreet)