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Is the era of rising oil prices already over?

Printed below is an English translation of an article published today by the Dutch Financial Times, Financieele Dagblad


Is the era of rising oil prices already over?

From our editor • Fair

Oil prices were on the rise. A barrel of Brent oil, benchmark for the world oil markets, dipped on the $ 45 last year, then started a climb that ended two weeks ago at $ 70. Then the draft came in. Last week, the price of a barrel of Brent dropped by the $ 62. Is this the beginning of an oil price decline?

Hans van Cleef, energy economist at ABN Amro

‘Oil may start to decline in the short term. The prices were very much gone. There has been some fear about the potential of American shale oil. That puts pressure on prices in a fairly speculative market.

In the long term, I see that the global demand for oil is steadily increasing. This is partly absorbed by the shale oil. But the question is sufficient to give even the Opec countries the space to slowly let go of their production constraints. I think Brent oil can go to $75.

The energy transition is certainly a topic. And in Europe, for example, demand is stagnating. Many Europeans already have two cars. But that is not the case in emerging economies in Africa and Asia. There is still quite some growth there. Think of aviation, the car industry and all plastics made from oil and gas. In almost every scenario the demand for oil will increase in the coming years.

I take a ‘balance price’ for oil. It is a highly speculative market. Then the oil price drops too fast, as when it went to $ 27. Then he shoots through it too hard. With the oil prices it is always yo-yo.

And of course that applies to the entire commodities market, where oil is seen as a ‘benchmark’. For diversification in an investment portfolio it is fine to have some raw materials, but keep it limited. ‘

Warren Patterson, raw materials analyst at ING

‘Oil can not escape the volatility that we have seen everywhere on the financial markets. And that volatility certainly played a role in the recent price drops of oil.

In addition, the so-called ‘long’ position in the oil markets had risen to a record. Investors had invested massively in an oil price hike. These positions had to be settled and that pushed oil prices even further down.

Basically we remain ‘bearish’ on oil. We think that prices can fall even further. The number of active drilling platforms in America is increasing. We are constantly seeing the production levels in the US picking up new heights and, as a result, US oil stocks are beginning to regain.

This year there will be a small oversupply. Just assume that the Opec will actually continue its intended production limitation until the end of the year. And that can be a challenge, because there are projects in Nigeria and Angola that should start in the second half of this year.

We think the price for a barrel of Brent oil will be $ 60 on average this year and $53 next year. The only risk for our scenario is the economy. It runs faster than expected.”

Roelof Salomons, investment strategist at Van Lanschot Kempen

‘In the short term, the direction of the oil price can not be predicted. But it has been hard lately, so it may be a little while with the oil price increase.

However, if we look at the medium term, we think that oil prices are likely to rise. The demand for oil remains strong, while the reduction of investments by the major oil companies will still have an effect in the next two to three years. In addition, existing oil fields will also yield less in the course of time.

On the other hand, the supply of shale fields is increasing. That must also be done, because otherwise there will be more shortages on the oil market.

In the coming quarters the market will come into balance, we think. Normalize the American oil stocks. And look at the Opec, which also wants the market to normalize. As long as that happens, this will also help the oil price in the short term.

In short, the current conditions are constructive for the oil price. The shortage is increasing, partly driven by strong demand. Economic growth remains strong, driven mainly by emerging countries.

And the prices in the long term? Given the development of shale gas and oil, we believe that oil prices will move around the current levels.’


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