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AMMAN — Oil prices are expected to reach $50 to $55 a barrel by the end of 2016, an international financial expert said in Amman recently.
Prices are also expected to rise further in 2017, said Ole Hansen, head of commodity strategy at Saxo Bank, a Danish investment bank.
“The $50 level is a line in the sand that the market is not prepared to break now as it may allow increased production from high cost producers," Hansen said at the 11th Jordan Forex Expo and Awards, held in Amman last week.
According to Hansen, the price will pass the $50 level, but not before the last quarter of this year.
Such a scenario will boost support to oil-dependent economies, he argued.
“The latest extension of the rally during May has been driven by major supply disruptions in Canada and Nigeria,” Hansen continued. “Just a few years ago similar disruptions would probably have triggered at least a 25 per cent rally in oil."
The rise in oil prices since they plummeted in January has surprised the market, especially the timing of the spike, he said.
Since January the global market has been in a slow recovery, with the recent major supply disruptions helping to balance it.
OPEC, he added, does not need to make any major decision at this stage "as the market has recovered since Doha".
Meeting in Vienna late last week, OPEC expressed confidence that the crisis of the past two years that saw prices plunge and splits emerge was now over, Agence France-Presse reported.
It said that since December, "crude oil prices have risen by more than 80 per cent, supply and demand [have been] converging and oil and producer stock levels in the OECD have recently shown moderation."
At the same time, the precious metals market is having a strong year, up by around 22 per cent, with gold having established a trading range since February, between $1,205 per ounce and $1,305 per ounce.
Gold remains a popular alternative investment, but it is heavily influenced by the performance of the US dollar, Hansen added.
"As the market now adjusts to a potential stronger pace of US rate hikes, the dollar has recovered some of its poise and it has triggered the first strong challenge to gold and the bullish beliefs among investors," he emphasised.
"Some volatility in gold cannot be ruled out, especially if the dollar strengthens further, but we believe that gold eventually will make a break above $1,305 per ounce after which it could target $1,380 per ounce. Further US dollar weakness could challenge support for gold, but it would take a break below $1,205 for it to get bearish,” the expert concluded.