Some of the world’s leading players in the oil industry are calling into question estimates from Goldman Sachs that the price of the world’s most important fossil fuel – oil – could plunge to as little a $20 a barrel.
Global oil prices have been hit with sharp declines over the past year thanks to new reserves becoming accessible via fracking and horizontal drilling.
The executive director of the International Energy Agency Fatih Birol told CNBC, “oil prices will be with us forever may not be the right way of thinking.”
Speaking from an oil conference in London, Birol said he expected the market to turn in the near future. “When we look at the next few quarters, we expect U.S. oil production to decline because of low oil prices and in Iraq, production growth will be much slower than in the past. And the demand is creeping up.”
The original research from Goldman Sachs published in September caused waves through an already embattled industry. There was a small sliver of hope for oil producers in the research, with Goldman caveating its research note, saying the likelihood of oil dropping to $20 per barrel was under 50 percent. Goldman’s most probable estimate is $45 per barrel in 2016.
Other financial giants have been almost as bearish on the price of crude as Goldman. Citibank forecasts that crude oil prices could drop to $32 per barrel.
While oil producing nations such as Venezuela and Russia may be inclined to hold back production to stabilize the price, these nations still desperately need foreign exchange and can ill afford to sit on vast quantities of oil. The world is producing 10 million more barrels of oil a day than it did 10 years ago.
But given squeezed profit margins, some U.S. producers may find themselves getting out of the game altogether or at least substantially cutting production.
“It is proven it is a very resilient type of production, but this level of prices, $45, $50 is not good enough to induce reinvestments and for production to continue to grow. Therefore, we expect as of next year, production growth will decline in the United States,” said Birol.
There remains no clear consensus on the direction of oil prices. According to CNBC, Standard & Poor’s is more bullish, forecasting Brent oil hitting an average of $55 per barrel in 2016.
Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact email@example.com.