Oil’s 60 percent plunge since early 2014 has led to much speculation that it has further to fall, especially the global economy weakens more than expected.
But one trader says oil will rally by 50 percent in 2016 based on his forecast of oil consumption, which is more optimistic than the estimates of the Paris-based International Energy Agency.
“The IEA underestimated demand growth this year and I believe they have done it again for next year,”
writes Anthony Lerner, a hedge fund manager who specializes in commodities, in a Seeking Alpha post. “There is every reason that global demand will grow by another 1.8 million barrels a day next year.”
That forecast compares with the IEA’s growth estimate of 1.2 million barrels a day for 2016.
“Growth in India is screaming driven by easing of regulations in their country, a burgeoning middle class and low prices,” he says “China doomsayers have been rampant in recent years, but growth in petroleum demand has been steady driven by low prices and a growing middle class. China also will not disappoint next year.”
He says this demand and the risk of heightened military tensions in the Middle East will lead to a rise in oil prices from the current level of about $37 dollars a barrel, the lowest in almost seven years.
“Oil priced at $40 or under for spot and $45 or so for deferred takes into account only the current oversupply and does not take into account at all the shift in the supply demand balance that will take place during 2016,” Lerner writes. “Moreover current prices completely discount any possibility of geopolitical risk causing supply disruptions in the Middle East. I think that during 2016 oil prices will rally 50 percent from these low levels. Invest accordingly.”
Meanwhile, Zacks Investment Research says low prices are here to stay, benefiting other kinds of investments.
“Losses in the energy sector can actually translate into gains for some other sectors,”
Zacks says in a blog post on the Seeking Alpha website. “While auto and transportation are the direct beneficiaries, sectors such as retail, consumer discretionary and consumer staples also gain from low oil prices.”
© 2025 Newsmax Finance. All rights reserved.