Oil Monthly Fundamental Forecast January 2016

Outlook and Recommendation

Crude Oil closed the month down over 7% and down close to 30% for the year at 37.08. Brent Oil climbed the last session of the year to trade at 37.61 after losing 33% this year.  After sliding into the $40s in early 2015, crude oil gained back some lost ground by summer, reclaiming the $60-a-barrel level. But as supply kept coming and demand remained sluggish, prices saw renewed pressure.

The Organization of the Petroleum Exporting Countries for the second year in a row refused to limit production.

Brent crude oil slid back toward 11-year lows on December 30 as indications of slowing global energy demand bumped up against record-high inventories.

Benchmark Brent, near $37 per barrel, traded just $1 away from those lows reached last week as the primary supportive factor – an expected cold snap in Europe and the United States – was forecast to be short-lived.

Oil prices were in freefall, down from around $120 (£79, €110) a barrel of Brent crude in July 2014 to below $40 in December 2015, amid a glut in supply. Counterintuitively, OPEC countries maintained their oil output to suppress its price further, rather than cut output to drive oil prices up. Poorer oil producers, such as Venezuela and Nigeria, suffered badly. This was to put pressure on the booming shale oil industry in the US in the hope it would suffer and so return OPEC to dominance in the industry. With little to suggest any radical changes in demand or supply — there is expected to be a little more of both — oil prices are forecast to remain suppressed in 2016. And Brent crude could well tumble below $30 a barrel unless production is cut or demand slows markedly.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

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