What Oil Recovery?

Oil prices have been on the decline this year as the global supply glut continues to weigh on markets. Despite some signs of falling production, most analysts still see a relatively gloomy future for the commodity in the near term, but long term investors are looking for a bottom in order to find some bargain buys within the sector. Where Are Prices Headed A survey by the Wall Street Journal showed that analysts are becoming increasingly bearish on the price of oil through 2016. The 13 investment banks questioned all cut their average forecast for Brent crude oil in the coming year by about $9. The banks said they see both Brent and WTI prices remaining below $60 well into the coming year. Who Survived? While oil producers have taken a beating this year, refiners like Valero Energy Corporation VLO and Phillips 66 PSX may have actually benefited from lower crude prices. Not only did the commodity's downward trajectory increase their margins, but the demand for cheaper refined products like diesel increased as consumers felt more comfortable driving further and purchasing higher consumption vehicles like SUV's and trucks. What About The Long Term? While most analysts agree that 2016 isn't looking much brighter for crude, they also say that oil won't be down in the dumps forever. The ultra low prices seen in today's market are unsustainable, and producers are already starting to feel the burn. Data from the US Energy Information Administration has shown that US production is on the decline and many expect it to continue that way until prices improve. It may take awhile, but many investors are betting that oil will make its way back toward $70 and $80 per barrel in the longer term.