With oil prices continuing a downward spiral, there have been plenty of discussions on the future of oil and how its market will be affected by emerging technologies. Despite dropping to less than $40 a barrel for the first time in months, several prominent analysts are expecting some form of turnaround to occur in the near future.
In addition to analyst predictions, the premium for loss protection in the oil market has also dropped, indicating a belief by oil traders that the market has essentially bottomed out and can only go up from here. Despite this rise in confidence, there are a few indicators that a turnaround might not be as forthcoming as predicted. One problem is the time period between July and October, when the demand for crude oil typically lessens due to refining maintenance.
Given the oil market’s tendency to move towards a balance between supply and demand, it seems logical that in the near future they will eventually converge. While prices may not rise immediately, it’s reasonable to assume that oil prices will at least rise a moderate amount from their current position. As analysts have noted in the past, oil doesn’t stay below $40 a barrel for very long before it organically recovers on its own. With that in mind, many companies are looking for new buying opportunities to invest in oil before another bump takes place.
While oil may be looking at a rise in the immediate future, it should be noted that this recovery will not last in the long-term. Alternative energy sources and a decline in global oil production will eventually hurt oil prices beyond recovery.