Crude oil prices plunged to a five-year low Monday amid sluggish demand and surging output, but that scenario will reverse next year, pushing oil prices higher, says Henry To, chief investment officer at CB Capital Partners.
"We believe oil's recent decline is overblown," he writes in an article for MarketWatch
. "We believe oil prices are now close to a bottom, and that Brent crude will average $80 a barrel in 2015." Brent traded at $71 a barrel Tuesday after hitting its five-year nadir of $67.53 Monday.
To offers three reasons why oil prices will rise next year:
- With Brent crude priced below $70 a barrel, global oil production will slide. In the United States, "with the recent decline in oil prices, shale oil producers will struggle to find fresh lenders willing to underwrite their growth plans," To writes.
- "U.S. oil demand will surprise on the upside in 2015, with Brent below $70 a barrel." Because gasoline is getting cheaper, more people are traveling by car.
- "The European Central Bank's 1 trillion euro quantitative easing will support oil prices" by boosting demand.
Meanwhile, CNBC commentator Ron Insana says Saudi Arabia and the rest of OPEC "may have just launched an oil war" in refraining from cutting production.
"This renewed threat from OPEC, and more specifically Saudi Arabia, demands the energy policy equivalent of a military response," he writes in an article for CNBC
So what's the appropriate response?
"The fracking revolution must be protected at all costs, even if it means subsidizing the industry with tax credits that allow the drilling to go on at below-market prices," Insana argues.
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