Heating oil prices NYMEX - November

Long Island, NY – November 18, 2015 – Oil prices this week crushed and there’s no telling when they will recover. The world’s three leading oil agencies EIA, OPEC and IEA all predict a big drop in stockpiles next year but they warn that prices won’t just jump because of that. Their argument is that once prices start recovering, investments will begin coming back, leading to supply increase yet again.

OPEC and Saudi Arabia keep pumping oil even as prices have sunk, increasing global supply and keeping oil prices even lower.

Michele Della Vigna, head of European energy research, Goldman Sachs, told CNBC, “We’re going through a period of oversupply, in all of the natural resources, and one way to reach a new equilibrium is when tighter credit starts to rebalance the market. As soon as the oil price goes back to $60, the capital comes back, the activity comes back, and the supply comes back.”

US oil producers had to dramatically decrease their cost of production in recent months to keep going. Oil rig count is down to 574, compared to 1574 rigs the same time last year.

Jodie Gunzberg, global head of commodities at S&P Dow Jones Indices says, “The ISIS attack on Paris might be the catalyst to change OPEC’s oil market policy of defending market share. Saudi Arabia may need to alter their focus to support defensive measures rather than maintaining oil market share. There is a pivotal question about whether Saudi protects the long-term value of oil reserves or if they defend their role as the pre-eminent Sunni power in the region… both are important.”

Oil prices are not expected to recover anytime soon, analysts predict that it may take 2-3 years or more to see any significant improvement in prices.