Oil: Energy beyond the barrel – BBVA

By FXStreet Research Team at BBVA, suggests that the current market conditions still suggest further oil price declines but as oversupply shrinks, a rebound in prices is likely.

Key Quotes

“Our baseline scenario assumes that the low oil price environment will continue for some time, followed by a moderate increase as production levels adjust. Over a longer horizon, prices are likely to be higher than current levels. However, the new equilibrium has shifted to the downside relative to the super-cycle, as the dynamics of slower expected demand growth and lower break-even prices come into play. This is a new paradigm, whereby hydrocarbons supply is abundant and accessible, but demand shifts towards multiple sources; nevertheless, as has always been the case, uncertainty remains elevated.

The world’s energy needs are not only massive, but also complex. On the one hand, vast amounts of cheap energy are needed to support economic growth in developing countries where population is expected to grow the most. However, as the impact of climate change becomes more acute and governments and private agents take it more seriously, the need for “clean and cheap” energy will no longer be an option but an imperative.

Hydrocarbons fit only in the “cheap” side of the equation. …read more

Source:: FX Street