Today oil prices fluctuate erratically after plunged 13% 2 weeks ago due to the Greek debt crisis and China’s stock. WTI had a spectacular reversal increased from $51.25 to $52.05, after Greece and the European leaders unexpectedly reached consensus on the reform of this country, to disburse the bailout .
Negotiations on Iran’s nuclear program has come to the “final phase” as the US Secretary of State John Kerry hopes that the agreement will be achieved today.
Oil prices is influenced by many factors at the same time, including Iran and Greece, but these factors were just temporary and over. The market will be driven by fundamental factors, supply and demand .
Oil prices may go down due to:
- International Energy Agency (IEA) lowered growth oil demand forecast for 2016 from 1.4 mbpd to 1.2 mbpd. Also according to the IEA, global oil supply increased by 550,000 bpd in June 96.6 mbpd. OPEC production increased by340,000 bpd in June to 31.7 mbpd, among them Iraq rose 270,000 bpd up to 4:12 mbpd, Saudi Arabia increased by 50,000 bpd to 10.35 mbpd.
- Commerzbank AG cut its forecast for Brent crude to $65 this year. Goldman Sachs Group Inc. and BNP Paribas SA both predict oil prices of around $45-50 due to oversupply and economic uncertainty.
- The IMF recently lowered its economic outlook for 2015 from 3.5% to 3.3%, while the US growth outlook was demoted from 3.1% to 2.8%, growth in developing economies down from 2.4% to 2.1%, and the emerging economic from 4.3% to 4.2%. Weak outlook on oil demand could threaten the recovery of oil prices.
Oil prices may increase because:
- Boone Pickens, the boss of BP Capital, predicted oil prices will rise to $70 or more as US production will slow in the recession and oil demand will increase by about 2 mbpd. At the same time he was not worried about Iran’s agreement: “Iran will not return to the market until next year, and if by that time you will need Iran’s oil.” He estimated that among 93 mbpd of oil supply, the US accounted for about 9 mbpd, OPEC is about 31 mbpd, the remaining source will be reduced by 5-6%, such as from Russia.
- The sharing same notion, Morgan Stanley and Societe Generale believe that oil prices will recover later this year thanks to greater demand and Iran will have a negligible effect on the market at this time.
Forecast: Oil prices may fall to the lowest level of July 7th at the price of $50.55, and depending on whether Iran and the P5+1 have been able to conclude an agreement today. WTI is still likely pop up to fill the gap hitting $52.81, the close pirce of previous week.