Oil Prices Will Fall And Stay Low, Say Analysts, But Disagree On The Severity

Olivier Jakob, managing director of Petromatrix, says the markets could feel more pressure from Iran

The oil price growth is over, now get set for prices to fall and stay low: that is the consensus of analysts, the most optimistic of which notes that the fall won't be a 2015-style collapse, and the most pessimistic of which worries about a failing global economy that may prevent oil from ever being sustained at the $70 level.

One of the more even-handed pundits is Olivier Jakob, managing director of Petromatrix, who, in referring to the lifting of economic sanctions against Iran, told CNBC, "We are about to enter a period where the crude oil markets could start to feel more fully the pressure resulting from the come-back of Iran.

"Saudi Arabia is moving out of its peak seasonal demand for crude oil right when global refining margins are under strong pressure, and that is not a good combination."

Jakob made these remarks after Brent crude fell 32 cents to $46.64 per barrel on Tuesday, and West Texas Intermediate settled down 59 cents at $44.65 per barrel; it was the lowest settle since May 9, when oil finished at $43.44.

In light of analysts calling for oil to slide to $40 in the second half of this year, Josef Schachter, oil analyst with Maison Placements Canada, told the Edmonton Journal that persistent excess production combined with Alberta's post-wildfire rebound and Libyan output starting to recover means that "we're going to go down from where we are now; second-quarter results are going be horrible when they come out for the majority of companies, and I think the glut issue will really hit in September."

Schachter predicts prices will hover between $40 and $46 per barrel for the time being and then, in September, "if the seasonal slowdown kicks in and OPEC is still producing in excess of demand, and China's imports drop as I expect, I think we'll bust to the low $30s.

"There is even a risk that we bust $30 and go back to the lows of February."

Energy specialist Arthur Berman is even more pessimistic: he views energy and the economy as inextricably linked and therefore regards terrorism, Brexit, and the Donald Trump presidential candidacy as part of an uprising fueled by a global economy that has been stretched to the limit and is failing.

Berman says the oil industry "is damaged and higher prices won't fix it because the economy cannot bear them; it is unlikely that sustained prices will reach $70 in the next few years and possibly, ever"; he calls the future for oil prices "frightening."

For the record, Berman's remarks, published in Zero Hedge, caused one reader to remark, "So we have graduated from the hysterical peak oil analysis (permanent high prices), to permanent low oil price theories: sounds a lot like the imminent ice age of the 1970s giving way to the imminent roasting of the planet in the 90s."

Putting it all into perspective is Ed Morse, global head of commodities research at Citigroup; he told CNBC's Squawk Box that while the downward price trend of oil is familiar and troubling, it won't result in the 12-year lows experienced last winter: "Just the supply-demand balances across commodities is significantly tighter.

"We are drawing inventories maybe a bit slower than people had thought, but there's not a lot of new incremental supply to come into the market."

As if to assure people who have been pummeled by the volatile market, Morse added, "Production is going down: it's falling rapidly in the U.S., China, Colombia, Mexico, Brazil, and that's what brings markets to balance."

Earlier this week yet another analyst, Helima Croft, managing director and global head of commodity strategy at RBC Capital Markets, suggested that India with its enormously high demand growth is the next catalyst for oil prices.