Macro Outlook: A price rout is possible

The near- to medium-term outlook for oil prices is looking increasingly bearish. Largely driven by North America, non-OPEC supplies are growing robustly, OPEC production is buoyant, demand growth is subdued and inventories are very comfortable. There is clearly the possibility of a price rout over the next year or two. However, we suspect that, in the near term at least, geopolitical uncertainties, fears concerning the fragility of production infrastructure and bullish financial market sentiment will help support prices. An extended period of soft prices could be on the cards through mid-decade. The analogy could be the second half of the 1980s.

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