Price of crude won’t reach $50 before 2017 – Report

It may take all year to get the price of oil up to US$50 a barrel, according to a new report from TD Economics.

The news comes after oil prices fell sharply Monday when OPEC countries in Qatar failed to reach an agreement on halting production.

Dina Ignjatovic from TD Economics says people must be patient when waiting for the oil industry to bounce back from the crash in 2015.

It’s mostly an issue of supply and demand, she explains.

A low price in oil leads to loss of investing. And a “lack of investment in oil around the world should ultimately lead to a pullback in production at the global level, helping to bring the market in to balance sometime next year,” she writes in the report.

Since OPEC countries won’t halt production, she predicts U.S. production of crude from the shale industry to fall to an average of 8.8 million barrels per day in 2016.

She also warns that higher prices are not sustainable.

“While not speaking for the industry, it does suggest that if prices were to reach that level (US$55) or higher, production could be ramped up, driving prices down again.”

That may be good news for Canadians. In a Friday report, CIBC deputy chief economist Benjamin Tal said Canada could benefit from lower oil prices.

But not everyone agrees.

“When oil prices are higher it helps governments in particular but also helps consumers, a stronger loonie equals better purchasing power,” Ambarish Chandra, a professor at the University of Toronto, told Global News on Monday.

The price of crude rose US$1.25 to US$42.44 late Tuesday morning, bringing the looney up with it to 79.11 cents US – the highest it’s been in the past nine months.



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