Baku, Azerbaijan, Feb. 20
By Aygun Badalova - Trend:
Analysts at British economic research and consulting company Capital Economics do not expect oil prices to shoot back to $100 per barrel anytime soon.
"The rebound in the price of Brent over the last two weeks supports our view that oil prices will gradually climb back to around $70 per barrel over the medium term, helped on their way by further evidence of reductions in investment," analysts said in a report obtained by Trend.
"However, we do not expect prices to shoot back to $100 anytime soon," they said.
The recent bounce back in the price of Brent appears to have been driven by the sharp drop in the number of rigs drilling for oil and the slew of announcements from major oil companies that they are cutting back on investment, analysts believe.
They expect further decreases in the US oil rig count and additional announcements of investment cuts by major oil companies over the next few months, as more drilling rigs come to the end of their production runs.
"This should eventually lead to falls in US shale oil output, as production from new wells can no longer compensate for the declines in old ones," analysts said.
Slowing production growth around the world, and especially in the US, is a key reason why analysts of British company expect the price of Brent to grind slowly higher over next few years.
However, high stocks and the potential for US shale producers to ramp supply back up quickly should prevent prices from surging, they also believe.
Overall, analysts expect the price of a barrel of Brent to end the decade at $70 per barrel.
During electronic trading on the New York Mercantile Exchange on February 19, the West Texas Intermediate (WTI) for March delivery decreased by $0.98 to $51.16 a barrel.
April Brent, which is the benchmark price for products in Europe and Asia, decreased by $0.32 to $60.21 a barrel on the London-based ICE Futures Europe exchange.
Aygun Badalova is Trend Agency's staff journalist, follow her on Twitter:@AygunBadalova