This is it. For real. The IEA means it this time, Reuters reported Tuesday.
“Oil prices appear to have bottomed out,” Neil Atkinson, the new head of IEA’s oil industry and market division, told a seminar in Oslo.
“Prices are expected to grow throughout 2016 and into 2017, reflecting expectations that the market is going back into balance in 2017,” he added.
US benchmark crude West Texas Intermediate is up 31% to around $34.50 since its Feb. 11 low, and international benchmark Brent is up 22% in the same stretch.
For all the volatility in oil markets since prices started sliding in the second half of 2014, the matter is still one of supply and demand (there’s way too much supply). That said, there have been some hints that Saudi Arabia, whose feud with US shale producers started the whole mess, has had enough. It’s not calling for a production cut yet, but for a freeze in production. Russia has its major oil companies in line, and several Latin American exporters have joined calls for a freeze.
Iran remains an outlier. The country’s oil leadership thinks a freeze is ”ridiculous” given the country is trying to get its oil sector back on its feet following years of nuclear program-related sanctions. Russia’s oil minister will (reportedly) fly to Tehran to talk things over, but in the meantime said the country will develop an “individual solution.” Whatever that means.
US production has been declining slowly and steadily. Western oil firms from Canada to Brazil are slashing their exploratory budgets as low prices make it unprofitable.
Calling a bottom is tough—US benchmark West Texas Intermediate ended up lower than the February low that sparked a bull market, but hey, maybe this time is different.