Earlier posts this week have touched upon many factors influencing the bearish market. The following is a recap of the events:
- The DOE statistics released Wednesday showed a build in all inventories
- The Federal Reserve increased interest rates by 0.25%, causing a stronger dollar
- The ban on U.S. crude oil exports is expected to be lifted
- Crude imports are at the highest levels since September 2013
- OPEC decided to not cut production for 2016
- El Nino weather conditions are causing lower demand for heating oil
The oil trader Pierre Andurand believes there are many indications that the price of crude oil will go below $30/bbl and could even go below $25/bbl in the first quarter of 2016. Goldman Sachs also expects oil prices to fall and continues to stand by its earlier prediction of $20/bbl being the bottom. In a report this morning, industry analyst PVM questioned how forecasts went from $200/bbl in 2008 to $20 now. Their opinion is that analysts suffered from a “lack of foresight and questioning of basic assumptions.” This brings to mind a recent article by Reuters analyst John Kemp, who made the argument that “there is no evidence anyone can accurately and consistently predict the price of oil more than a few months ahead let alone for years or decades in the future” and that the only certain thing about the oil market is it will be volatile (http://www.reuters.com/article/oil-prices-kemp-idUSL8N1443E920151216).