2015 saw a steep decline in oil and gas prices and oil stocks took a huge hit. But in November 2015, the International Energy Agency forecasted that Brent Crude will rebound to an average of $80 per barrel by 2020. Given that oil is hovering around $30 a barrel right now, when oil prices will reach the bottom and when they will start rising again?
If you're banking on oil prices going up any time soon, you might be out of luck.
In 2016, two countries have restarted exporting oil: Iran and the United States. Iran has 150 billion barrels of reserves and is planning to increase its production to 2.5 million barrels per day, up from 1 million right now by the end of the year. The Islamic country intends to export most of its output but, in order to access an already saturated market, it will have to offer lower prices than its competition. The main buyers of Iranian oil will be India and European counties due to their proximity to the Middle East.
The United States, since the oil export ban was lifted, will try to export part of its output, too. However, American companies will find it difficult to compete with foreign producers because Brent Crude is trading almost at the same price as the West Texas Intermediate, and OPEC Basket price is just $22, making U.S. oil more expensive than Middle Eastern oil. The initial buyers of American crude will be Latin American countries and Japan, due to their proximity to Texas and Alaska respectively, where important shale plays are located (Eagle Ford and Permian Basin in Texas, North Slope in Alaska).
Therefore, this year will be characterized by an oversupply of crude oil, which will likely drive prices down further. Such market conditions are not expected to improve until the end of 2017. By then, the Chinese economy should have recovered and the oil glut should have been absorbed by an increased global demand.