Brent "unlikely" to cap $60/bbl by end-2016, experts say

The oil price is unlikely to exceed $60 per barrel by the end of 2016, using Brent as a global proxy benchmark, industry experts said on Tuesday at Fitch Ratings' London Energy Seminar.

Alex Griffiths, Head of Natural Resources and Commodities at Fitch Ratings, noted oil and gas majors were learning to cope with $55/bbl oil prices.

“But there is a fair degree of uncertainty in the market with major sector players coping (or learning to cope) with differing levels of success," he added.

“Our new assumption for ratings purposes, or price deck, is for Brent to average $55/bbl in 2016 and $65/bbl in 2017, with WTI averaging $50/bbl in 2016, rising to $60/bbl in 2017.”

Also speaking at the Fitch event, Tim Barker, Head of Credit Research at Old Mutual Global Investors, said, “There are plenty variables, and it is become increasingly hard to predict the rate of decline of US production. All things considered, I see nothing on the horizon which convinces me that oil will shoot above $60/bbl.”

Julian Mylchreest, Global Head of Energy at Bank of America Merrill Lynch, said the direction of travel would depend on how fast oil production would fall next year, but agreed with Barker that the uptick was unlikely to exceed $60/bbl, and “perhaps $70 tops.”

Mutlu Guner, Executive Director at Morgan Stanley, said, “I see the oil and gas business already pulling away from the $100/bbl default thinking. Capital expenditure cuts within the industry will trigger production declines, but we won’t see a dramatic rise in the oil price, as supply correction will take time. I too am inclined to think Brent will be in the region of $60/bbl come the end of the year.”