Saxo Group Videos

A year of low oil price - so what's changed?

In June last year, Brent crude reached a peak price of just below USD 116 a barrel. It was downhill after that as the price plunged to as low as USD 45 a barrel in January this year.

Saxo's Ole Hansen discusses the reasons for the crash, most notably increased supply combined with falling demand. Although there has been a market bounce this year, Hansen warns that the upside still looks limited.

On the plus side, Hansen notes that the cost of producing oil has now fallen, particularly in the US shale business. He says this illustrates profitability is improving. But he also points out that there has been a dramatic cut in capital expenditure which could impact oil supplies in four or five years' time.

Ole says the changing situation has proved beneficial to some major oil companies as they have sought to buy up smaller companies - for example, Shell purchasing BG Group.

For investors, however, it's been more difficult. Hansen points to those in ETFs who are not getting returns on their investments. He expects the market to drift lower with WTI hovering between USD 50 and USD 65 in the third quarter.

03:56 minutes
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