Oil Market Deja Vu: Are We Heading Back To $30/Barrel?
While oil’s climb above $45/barrel is reassuring some, others say the market is heading towards the same trap as last year.
Commerzbank, BNP Paribas and UBS all say that crude’s 70% spike from January’s 12-year low looks just like the recovery over the same period in 2015—after which oversupply saw prices tumbling back down in May.
“There are dangerous parallels to 2015,” Eugen Weinberg, head of commodities research at Commerzbank, told Bloomberg. “The market already appears overheated and a correction is overdue.”
Of course, last year prices were higher overall, as crude rose 45% to around $68/barrel in May before their June dive.
Even if prices remain in the $40s, there’s still the question of $147B in unfunded loans promised to energy companies (before the oil slump) by the US’s largest banks. Energy companies haven’t tapped those funds yet, and banks are hoping they don’t have to shell out money to a struggling industry.
“With oil at $60, it’s not that big of a deal. With oil at $40, it becomes more of a source of concern,” Barclays analyst Jason Goldberg said in mid-April of the unfunded loans. [Bloomberg]
