Oil prices will probably weaken by another 20% to $15-$16 per barrel over the next six months, helping drive the world economy out of recession, Credit Suisse Asset Management said today.
Robert Parker, deputy chairman of Credit Suisse Asset Management, said he saw weak demand and swollen inventories depressing oil prices and inflation, despite the best efforts of OPEC exporters to get prices back up with big supply cuts.
"A low oil price is in the interest of everyone except the oil producers," he told Reuters. "I am sure the American and European governments like the idea of $15-$16 a barrel because that will underpin and reflate the G7 economies."
Brent crude has fallen from $30 per barrel in mid-September by more than a third to $19 as demand wavers and exporters, led by the OPEC cartel, have been slow to agree to supply cuts.
"Our overall thesis is that prices stabilize at $15-$16 and, as economic growth returns in the second half of next year, we will see the price go back toward $20," Parker said. "But I don't see $30 at least on a three-year time horizon."
OPEC, which controls two-thirds of world exports, said earlier this month that any further output cuts depend on substantial contributions from rival exporters including Russia, Mexico and Norway. Mexico and Norway have agreed to OPEC's conditions and a global supply deal now hinges on Russia, which is weighing the commercial benefit of a cut against other possible advantages of keeping its distance from the Arab-dominated cartel.
"Any cuts by Russia will either be a sham or will be temporary," Parker said. "One of the reasons for that is the state of the industry where there is very old infrastructure and their ability to turn the taps off is limited."