"We're forecasting that oil prices remain stable in 2016 in the $40-50 range for the reasons discussed above, and that prices rally to the $50-70 range in 2017 as global offshore production starts to decline in response to an enormous cutback in capital expenditures by the major oil companies," Hatfield states. "This decline is likely to produce a small shortage of supply relative to demand and eliminate the excess inventory of oil, which will allow the price to increase to the higher range indicated."
Others note that oil hasn't traded below $27 per barrel since November 2001 - yet, in the years leading up to that time, price drops in the low $20s weren't unheard of - that was the case in 1998 into early 1999. "The market survived and prospered for years thereafter, and some of the factors that have led to today's oversupply and the resulting drop in prices were born in that boom," says Ted Gavin, managing director and founding partner of the bankruptcy consulting firm Gavin/Solmonese. "A market adjustment to the chronic oversupply brought forth by development of the Bakken and other factors should have been expected, and prices should come back when the herd is culled of the weaker producers and supply eases."
Nobody will make money at $26 per barrel, Gavin adds. "Those who are healthy enough to live on cash reserves and take on debt until the market turns will be the ones who make it through the trough in the market," he says.