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Royal Bank of Scotland: Oil may reach $16 a barrel in 2016

The Royal Bank of Scotland (RBS) has announced clients to brace for a "cataclysmic year" with a global deflation crisis, warning that many major stocks will fall and oil may reach $16.

by Mihai Andrei
January 13, 2016
in Economics, News
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The Royal Bank of Scotland (RBS) has warned clients to brace for a “cataclysmic year” with a global deflation crisis, claiming that many major stocks will fall and oil may reach $16.

Image via Pixabay.

Oil prices have been tumbling in the past months, with the barrel crashing below $30 for the first time since 2003, marking a spectacular 72% plunge from June 2014 peak of almost $108.

“The fundamental situation for oil markets is much worse than previously thought,” Barclays commodities analysts wrote in a client note.

The RBS has been even more stark with their warnings. In fact, the drop in oil price isn’t even the most worrying thing after them – they expect almost everything to drop.

“Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” they said in a client note.

China is spooking everyone at the moment. Their stock closed at lowest level since September, and if their economy is slowing down, then they will also likely need less oil to fuel the country.

“Just in the past week, strong fears of a hard landing in China have reemerged with a vengeance,” Michael Wittner, global head of oil research at Societe Generale, wrote in a research report.

The drop in oil price has been fueled by a gut, caused in great part by the American shale oil boom. U.S. oil production has not been hit nearly as hard as most people anticipated, being one of the few countries that are dealing with the oil price crisis with some success. Iran has also started pumping out massive quantities of oil recently, contributing to the lowering of prices. However, just how low the oil price will go is a deep mystery at the moment.

 

Tags: economyoiloil price

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