Will oil keeping going down? what might keep it where it is? Here’s some analysis from Nordic corporate bank SEB:
“There are several big differences between the current oil price cycle and previous cycles. In 2008 and 2009 OPEC cut production to balance the market. That makes for a much faster rebalancing of the market and thus a faster price recovery. This time OPEC is leaving production to the market which makes for a more drawn out price recovery. The next important difference is the existence of US shale oil, a flexible source of supply outside of OPEC. In previous price cycles the oil price could rebound once a balance in supply/demand was within arm’s reach. This was possible because a higher oil price would not lead to any increased supply for at least five years due to the long lag between investments and new supply. This is not the case this time around. If oil prices start to move substantially higher at an early stage it will very quickly lead to higher US shale oil production, which will then prevent a rebalancing of the market.