So what’s in store for oil in 2015? With prices falling fast and hitting five-year lows in mid-December, commodities research teams at the world's investment houses and banks are scrambling to revise their 2015 predictions for oil and the potential impact on global economies.
And as wildly fluctuating as the price of oil has been, so have the predictions. HSBC told investors to prepare for $95 a barrel by the end of 2015, but other analysts have been far more bearish. Morgan Stanley cut its 2015 forecast for Brent saying that in a worst case scenario crude prices could fall to $43 per barrel in 2015, although its base case scenario stood at $70.
2014: A Turbulent Year
2014 was a tumultuous year for oil, with Brent crude prices declining around 50 percent since June on the back of an over-supplied market and lack of global demand. Traditional oil producers such as Russia and Saudi Arabia in the east to shale oil in California and oil sands in Alberta in the west have witnessed a glut of oil production and its impact on currencies and economies has been felt across the world.
When the Organization of Petroleum-Exporting Countries (OPEC) decided not to cut production when it met in November, the 12 major oil producers effectively placed the onus on the newer oil companies in U.S. to see who could keep up with the fall in prices and who would make the first move in cutting production.
On Jan. 2, benchmark Brent crude was trading at $57.11, having fallen from a high of around $115 a barrel hit in mid-June.
Made in America
The U.S. shale revolution and its accompanying rise in oil production has been a decisive factor in the fall in the price this year. Analysts believe that the U.S. might not back down on its shale production but are uncertain whether U.S. shale oil producers can withstand the fall in prices into 2015 and dent OPEC's market share.
According to Melanie Debono, economist at Capital Economics, “Prices are already approaching the danger point for the bulk of U.S. shale output, so industry costs would have to fall for prices to be sustainable at these lower levels." There is a risk, Debono added, that an extended period of lower oil prices would lead to large cuts in output in both the U.S. and Canada.
If the oil price continues to fall, global markets are sure to turn again to closely watch the next move from OPEC, which produces about 40 percent of the world's crude oil, according to the U.S.'s Energy Information Administration.