Baku, Azerbaijan, Nov. 7
By Aygun Badalova - Trend:
Analysts of the British economic research and consulting company Capital Economics expect the world oil price to fall further, with the Brent to end 2016 at around $80 per barrel.
"Looking ahead, although we would not be surprised to see a modest rebound in prices before the end of this year, we expect prices to end 2016 at around $80 per barrel. This is due to both supply and demand factors", the report by Capital Economics, obtained by Trend, said.
The analysts of the company mentioned that the price of Brent crude averaged approximately $110 per barrel between the early 2011-mid 2014, and it traded in a relatively narrow range during that period. But since June, prices have slumped.
With respect to the affection of the slump in oil prices the world economy, analysts believe that the collapse should act as an "automatic stabilizer", providing some reassurance to those fearing the worst.
Overall, they believe that lower oil prices are a net positive for the global economy, primarily because they provide a windfall gain to consumers in advanced economies. At the same they believe that the slump in the oil price will do little to rejuvenate the key emerging economies, analysts said.
In a report analysts stressed that the significance of a fall in oil prices depends to a large extent on whether it results from weak demand or from an increase in supply.
"If the price falls only because of the weaker demand, then it should be seen primarily as a symptom of a global slowdown", analysts said.
In these circumstances, cheaper oil should help to limit the extent of the resulting downturn, acting as a kind of "automatic stabilizer", although it is possible that consumers will chose to save more of their windfall if the overall economic outlook is particularly bleak, the report said.
In contrast, a fall in oil prices which is driven by increased supply should have a positive impact on the world economy, according to the analysts.
During Thursday's electronic trading on the New York Mercantile Exchange the West Texas Intermediate (WTI) for December delivery decreased by $1.44 to $77.56 a barrel.
December Brent, which is the benchmark price for products in Europe and Asia, decreased by $0.68 to $82.39 a barrel on the London-based ICE Futures Europe exchange.
The issue of whether to keep or cut OPEC's oil production quotas will be discussed on November 27. Cartel's current production quota amounts to 30 million barrels per day (mbd). OPEC holds 60 percent of the world's oil reserves and 30 percent of supplies.