© Paul Rosenberg
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It is difficult to make a forecast for the price of oil to stay at $45 for the remainder of 2016. It could end up there, but there is almost certainly going to be some significant volatility between now and then. We lean more towards lower prices than higher at this time.
What will be the main drivers for oil prices in the near future?
The market will continue to watch for a possible reduction in crude oil output by OPEC, but since they never made a reduction when oil was significantly lower, at this point it would seem likely that they will not reduce output unless we see another sharp decline in the price of oil back under $30 or worse.
Traders will also be focused on developments in major global economies-consumers of oil and how risk assets, namely stock markets, react to those developments. China weakening threatens global stability, and if China continues its downward trajectory then it will have a material impact on other major consumers of oil such as the U.S. and Japan. This would hurt the demand side of the supply/demand chain, thus putting pressure on oil. Conversely, if a pick-up in global growth takes hold, the lesser likely scenario in our view, then oil should be supported.
What is your outlook for the oil price in the short and long term?
In the short term, oil is likely to be range-bound between the highs over $50 and the low $40 area. Longer-term forecast will be highly dependent on how things unfold with the fragile global economy and its impact on financial markets. There is elevated risk that global stock markets will decline at this time, which in return means not all is well on the economic front. This would lead to downward pressure on the price of oil during the second half of the year.