What’s the story?
In a report on Friday, ratings agency Fitch predicted an average oil price of $70 a barrel for 2015. That’s a 56% increase on current prices of $45 – but is “markedly lower” than the $100 a barrel figure it predicted back in July 2014.
What does everyone else think?
Fitch’s view is a popular one. Igor Sechin, chairman of stricken Russian energy giant Rosneft, told reporters at the end of 2014 that the company expects global oil prices to average $70 to $75 a barrel this year. The plunging oil price has forced Rosneft to seek $46bn of state aid to service its debt and cover investment.
Chad Mabry, an energy analyst at a New York investment bank, agrees with that forecast. “If you look at the fundamentals into the back half of 2015, we are seeing equilibrium on supply and demand balance”, he said in an interview with CNBC. “We are seeing supply come down.” This would, in turn, put prices up.
Who benefits from higher oil prices?
Higher prices would be good news for energy-exporting countries like Russia, Venezuela and Saudi Arabia, whose balance sheets are heavily reliant on oil.
In Russia, an oil price significantly below $70 a barrel “could precipitate a deeper recession and put further strain on public finances, severely limiting the authorities’ room for manoeuvre”, Fitch’s report states.
Who benefits from lower oil prices?
Governments and the world economy. Quoted in The Economist, the IMF’s Tom Helbling says “a 10% change in the oil price is associated with around a 0.2% change in global gross domestic product.” A falling oil price boosts economies by putting money into the hands of consumers – who are more willing to spend it.
Chances the prediction is right: 78.5%