Prices for Brent crude oil are expected to average $44 per barrel in 2016, and $52 per barrel next year. However, the existing values for options and futures contracts indicate high uncertainty in the future prices.
For example, the U.S. Energy Information Administration’s prediction for the average West Texas Intermediate (WTI) price of $48/b in October 2016 should be viewed vis a vis the values for Nymex contracts for delivery in October 2016.
Contracts transacted during the 5-day duration ended July 7 indicate that the industry expects prices for WTI to range between $35/b and $67/b, at 95 percent confidence interval (Market Prices and Uncertainty Report).
Oil prices had sensationally dropped below $40/b at the end of last year, down by over 60% from their price levels in summer 2014. This reflects rampant and carefree supply and low global demand even as there are concerns over weak economic expansion around the world, more so in China. Consequently, oil prices are expected to remain low in the near future, but it would not be a surprise if volatility resumes.
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