UBS says the recovery in oil prices this time around is going to take a lot longer than previous episodes, when prices recovered in average of 17 months; they reckon its going to take no less than 60 months this time:
- But oil is now facing a different reality
- Price crashes of 2008 and of 1997/1998 were driven largely by weaker demand
- But the current selloff has its roots in the oversupply of oil around the world … that, along with lackluster demand, no OPEC cuts to quotas … will make the recovery slower and more painful, UBS says
UBS says it:
- Estimates that oil supply is currently overshooting demand by 1.3 million barrels a day
- Sees Brent, the global price benchmark, averaging $52.50 a barrel this year, down from a previous forecast of $69.75
- Cut its projection for WTI, the U.S. marker, to $49 a barrel from $64.75
With the “process of correction clearly underway and significant cuts to capital expenditure already being announced,” the bank sees both contracts rebounding to over $60 a barrel next year. It forecasts that by 2018, about 60 months after the beginning of the slump, Brent will cost $90 per barrel – the new “normal” price for oil
Looks like the recovery hasn’t started today yet:
