Oil prices to rebound, but will remain below last year’s highs.
Oil and gasoline prices will begin to bounce back this summer and exceed current price levels by the end of the year as industry production cutbacks kick in, experts interviewed Tuesday on CNBC said.
Petroleum companies are rapidly trying to scale back operating costs to meet slower demand. One hundred fifty drilling rigs have been shut down in the past two weeks, and oil and gas services firms Schlumberger and Baker Hughes on Tuesday announced cuts of 16,000 jobs between them.
Crude oil prices will recover to about $70 a barrel in 2016, but not before prices fall some more, possibly to $30 a barrel, or even $20 a barrel, Eric Lee, a commodities analyst at Citi, said.
Even OPEC producer Iran has issued statements that it can envision oil prices coming down to $25 a barrel in the near future.
Supply is so great now that there is not enough storage capacity and some producers are looking for tankers to store product at sea, but inventories will start to come down in a meaningful way by the fourth quarter, Lee said.
John Hofmeister, a former Shell Oil president and founder of Citizens for Affordable Energy, predicted that gasoline prices will rebound by the fourth quarter or end of the year to where they were last June.
The national price of regular gasoline is $2.05, according to the AAA.
World demand will reach 100 million barrels a day by 2018 or 2019, and crude oil prices will return to last year’s levels then because production will be unable to keep up, Hofmeister added.
The lower price of gas at the pump is putting more money into people’s pockets and economists expect consumers to use that extra cash to buy other goods and services, which should help grow the economy. Lower fuel prices are also lowering operating costs for transportation companies, and helping keep prices in check for their customers.
Experts say oil prices will bottom out, then rise in 2015
