2016 Predictions

As always at the turn of the year, there are multiple debates about the direction of oil prices and the state of the industry.  If we look back to our survey of 2015 prospects, it’s clear that in common with the rest of the world, our respondents got it wrong. Only one person predicted a price below $40; most were in the $60-$90 range, with a few even predicting $100+. And in terms of general mood about the industry, while only a few were very optimistic, most were generally positive, with the pessimists very much in the minority. How will this change in 2016? Click on the link below to take our 2016 survey – it’s very short, just 8 questions to test the mood of the industry, with all answers kept anonymous. Results will be published in February.

WBC 2016 Industry prospects survey

Looking at the media, most pundits are pessimistic for 2016. Andreas de Vries, who wrote last month’s piece on strategy, summed up the various trends affecting the price in an article on OilVoice. And of course analysts have been poring over the data to try to come up with accurate predictions – it will be interesting to see how their predictions compare with our quick snapshot survey.

Among banks, Goldmans seem to be leading the pessimists with talk of $20, while back in November, Credit Suisse and Barclays were more bullish, heading towards $80.  Euan Mearns, writing in the Energy Matters blog had a Business As Usual forecast of $37: “This is grim reading for all those involved in and around the oil industry. Worse still, I think there is high probability that we see sub-$20 oil before the first quarter is out. But this is great news for consumers. The reason is gross over-supply sustained throughout 2016, helped by Iran coming back to full market with an additional 800,000 bpd. In addition to BAU I present two other scenarios. Capitulation where OPEC throws in the towel and cuts 5 million bpd that sends the price back to $100. And Event where terrorist activities in Saudi Arabia (or elsewhere) sends the price towards $100. The world has 3 billion barrels in storage and this may hang over the market for years to come.”

And also writing in OilVoice, Paul Hodges of ICIS is predicting $25 or even lower to $10, if the price falls below the 2008 low point of $36.2.

Of course, this is just a random selection of some of the commentary around 2016 prospects. But it’s clear oil price bulls are in short supply: interestingly, on the crude (but often telling) measure of Google Search rankings, the last positive entries for Oil Price Bulls, or Oil Price Optimism, or Oil Price Rises all pre-date November 2015. For the contrarian, maybe this is the time to be optimistic about the oil price and therefore a recovery for the industry.

And what does all this mean for management and leadership in the oil industry? Leading teams, motivating staff, attracting talent and growing a business in a market full of pessimism requires a very different approach to that used in better times, when jobs and profits were plentiful.  Adaptability, the development of new skills and an understanding of the bigger picture will help you to ride out the tough times. Are businesses adapting their management styles and structures as well as simply cutting costs? How are they dealing with the changing mood in the industry? We’d love to hear your views.

 

 

 

Comments

  1. The truth about low oil prices is an ironic truth because no one should be dancing with glee about low oil prices.
    The ironic truth is we are all better off with higher oil prices my view is based on the fact that the worlds stock markets
    needs investment from oil rich states make so the maths is simple if say opec countries have a fall in oil revenue their investment fund managers have less funds to invest in the stock market and less investments mean less jobs and a smaller pension pot and stagnant growth.I think oil prices will have to go up and that wont happen till all the fracking companies go bust as they are the main reason oil prices are so low.

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