Game of prediction: A reality check!
An eventful year-2016 is just completed and the New Year 2017 is expected to deliver results for all; a Good Luck wish is much desired for the oil & gas sector. It seems in 2017, oil price dynamics will continue to remain uncertain and volatile. The bright spot is that most of the projections, including from the World Bank, indicate that oil price is on recovery path but it is far away from the sweet spot. EIA forecasts Brent crude oil prices to average $52 per barrel in 2017 compared to $43 per barrel in 2016, close to 21% upward correction. West Texas Intermediate (WTI) crude oil prices are projected to average about $51 per barrel in 2017.
The World Bank prediction is giving a more optimistic oil price value of $55 per barrel. Whereas BofA Merrill Lynch predictions are highly optimistic with WTI Crude priced at $59 per barrel and Brent – at $61 per barrel in 2017. Investment bank Goldman Sachs predicts average WTI price to be $55.6 and Brent to be $57.4 in 2017. Such optimistic predictions would make the upstream investors quite hopeful if not very comfortable. History suggests that oil price predictions have been tricky, therefore on many occasions’ forecasts have been missed by miles. Generally, predictors either over estimate or underestimate oil prices. Now most analysts are inclined towards a bullish oil market. On the contrary Standard Chartered Bank predicted oil prices falling to as low as $10 per barrel in 2016 --- such a slump was last seen during the Asian financial crisis in 1998. Arguably, the prediction completely went wrong. Rather oil prices have shown good recovery towards the end of 2016. The upward oil price corrections are likely to continue in the first half of 2017 and the second half may deliver even better performance.