The oil market outlook suggests sentiment is the key driving factor for prices, with the fundamental scenario remaining unchanged since September last year, according to Gaurav Sharma, Independent Oil Analyst.
$40 will likely be the base for Oil
Sharma, a supply side analyst believes that the fundamental scenario for oil hasn’t materialised at all from what was seen in September, 2014, and the current lower trajectory is mostly sentiment driven. While other analysts expected a move to the $30/barrel - $35/barrel figure, Sharma remains in favour of $40/barrel being the lowest price oil prices will reach.
Fundamentals: Iran can’t add more to the supply glut any time soon
Sharma explains that even if China growth dipped to 0%, the oil imports will still remain at 2011 levels. Looking at Iran, he believes that the country won’t add into the supply glut for at least another 18months, and US producers will not give up so easily.
Oil supply correction ahead?
Sharma says that the supply-demand fundamentals for oil remains the same, adding that a correction in the supply picture might be in store into the final quarter of this year, hence forecasting $62.5/barrel to be the average price for this year.