With Brent futures reaching $41 per barrel in March, the International Energy Agency sees “a light at the end of the tunnel” and Goldman Sachs Group Inc. has pointed to signs of its recovery.But many analysts warn that, like the failed rally last year, this recovery may stop.
“If prices keep going up, the US production from shale producers is extremely responsive,” the vice president of crude markets at IHS Energy, Jamie Webster, told Bloomberg.
The US crude production has retreated 5.5% since last summer, but the process of depleting bloated inventories is just getting started, according to Goldman Sachs. The bank, which foresaw oil’s plunge to $20-30 per barrel, predicts prices still need to stay low enough to starve producers of capital, otherwise the output losses necessary to remove the surplus supply won’t happen.
"Brent futures have recovered about 40% from the 12-year low of $27.10 per barrel reached in January. The rally could in any case sputter out before it even reaches the point that revives US production,” an analyst at UBS Group AG in Zurich, Giovanni Staunovo, said. Temporary support from pipeline disruptions in Iraq will fade, while talks between OPEC and non-members on freezing supply while have little impact, he believes.
This year’s price trend is nonetheless similar to last year's, Webster added.
