Oil bulls' hope for quick price dip dimmed by 2020 crude under $70
By Jonathan Leff
HOUSTON (Reuters) - As oil prices entered a second steep slide a few weeks ago, bullish traders and analysts had hoped for a repeat of the sharp but short dip that occurred early in the year - a speculative slide below $50 a barrel followed by a quick recovery.
Some are now reconsidering that view, as long-term oil prices take the lead in the market's latest dive, swaying sentiment toward a lengthier slump that would mean prolonged pain for big producers, from Exxon Mobil Corp to Saudi Arabia.
While immediate delivery benchmark global Brent crude oil futures at $50 a barrel are still about $4 higher than they were at their lowest point in January, prices for delivery in December 2020 are nearly $8 lower than the start of this year, trading at a contract low of less than $67 on Tuesday. A year ago the contract hovered at around $100 a barrel.
The reason for the deterioration of the forward curve and decline in "long-dated" futures is a subject of debate.
But even some who disagree with the fundamental logic of lower long-dated prices are coming round to the scenario that prices will be lower for longer.
"The back of the market has led prices lower as speculators are no longer convinced higher oil prices are required to balance future oil supply and demand," consultants PIRA Energy Group, which called last year's price slide but has also predicted a sharp rebound, wrote in a note this week.
The firm does not make its specific forecasts public.
"PIRA disagrees with this view, but a 'show me' mindset regarding tightening balances will keep prices lower than forecast earlier." Continued...