The jubilation of the Super Bowl has come and gone, and financial analysts, traders and investors are left with the grim reality that commodities prices are likely going to endure multiple years of depressed prices. This is the opinion that is shared by many commodities brokers, including the Chief Executive Officer (CEO) of Vitol. It was recently announced that Ian Taylor – the CEO of the Vitol Group – foresees crude oil prices remaining in a tight trading range between $40 per barrel and $60 per barrel right through until 2025. Such news hardly inspires confidence in a depressed energy sector which has been attempting to claw its way out of a rut with China weakness, dollar strength, ludicrous oversupply by OPEC and non-OPEC countries alike, and slack global demand. Indeed, any optimism shared by those in the energy sector has quickly evaporated and given way to a reality of what is likely to be a prolonged spell of slack energy prices.
The general opinion of those in the energy sector is that as long as China weakness persists, crude oil prices are likely to remain depressed. And the trading range that commodities experts are forecasting for oil in 2016 is between $40 per barrel and $50 per barrel at the very most. There are several reasons why prices will not be able to rise for any prolonged period of time, notably the enticement that higher prices bring to oil producers. As oil prices move higher, more oil producers are lured into the industry. This has the effect of over-saturating supply and causing a reduction in prices once again. The global economy, fueled by China weakness is in tatters; one only needs to look at the state of emerging markets to verify this. The currency depreciations taking place across the emerging market world are widespread, notably the South African Rand, the Turkish lira, the Brazilian real, the Venezuelan Bolívar, the Russian ruble, the Malaysian ringgit and others. Dollar strength is a disincentive to rising commodity prices, especially dollar-denominated commodities like crude oil, copper and the like.
