Oil Forecast: Will the Oil Glut Dry Up Soon?

Oil Forecast Summary

  • Iranian capacity to produce oil is severely hampered in the short-term.
  • Demand for oil in China and India is still growing.
  • Conflicts in oil-producing nations make a regular supply of oil from those countries uncertain.
  • Potential for OPEC to finally cut production levels.
  • Algorithmic analysis concludes little to no correlation between long term and short term price expectation.

One of the most notable global economic stories in the later parts of 2014 and throughout 2015 was the substantial drop in oil (NYSEARCA:USO) prices. As a result of the mass development of fracking, an economic slowdown in China and Europe and OPEC refusing to cut back on their production levels, supply has heavily outstripped demand which thus caused oil prices to halve from Oil Forecastover $100 in April 2014 to just above the $50 it is today. Iran is in the top three holders of both proven oil or gas reserves and, now that sanctions on Iran look set to be lifted, supply looks set to outstrip demand even further.

Conversely, various macroeconomic and geopolitical factors would point to the price of oil appreciating in the upcoming months despite the current glut in oil supply. Over the past few months oil prices have reached phenomenal lows and most countries have welcomed the cheaper energy prices. But, due to high demand in India and China, obstacles halting Iranian production, numerous conflicts in regions saturated in oil and the likelihood of OPEC cutting production levels, oil prices will inevitably rise.

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