Since 1982, the year oil prices were deregulated in the US, the import oil price to the US has averaged USD 52/bbl in 2015 dollars. It is volatile, having a monthly standard deviation of 9%, although volatility ebbs and flows. The global oil price, like the price of any commodity or security in a free and open market, incorporates all available information almost instantaneously and follows a random walk pattern.
With the above factors in mind, what can today’s oil and gas professional expect for the near- to mid-term oil price? Although the answer may not be welcome, a fairly stable set of conditions coalesce to make a strong reason to expect the oil price to generally range between USD 30/bbl and USD 60/bbl for the foreseeable future.
To understand the situation, it is helpful to first look at two global macro factors. First, the world consumes approximately 90 million bbl of oil every day. And second, three countries, Saudi Arabia, Russia, and the US, are the largest suppliers, with each producing between 9 and 11 million BOPD (Table 1). Beyond these three countries, production drops precipitously.
The Reason to Expect Prolonged USD 30–60/bbl Oil
Rodney Schulz, President, Schulz Financial
04 September 2016