Oil prices will recover only slowly from their collapse in 2015, the Economist Intelligence Unit has predicted.
The forecasting body said in a report After the Freefall: what to expect from commodity prices, that after this year’s plunge the outlook for raw materials was highly uncertain given slowing economic growth in China and looming interest rate rises in the USA.
Crude oil prices were unlikely to return to pre-2014 levels because of abundant supply and only modest demand growth, meaning virgin oil would remain cheap for plastics manufacture.
This has had a severe impact on the plastics reprocessors whose prices have become increasingly less competitive as oil prices fell.
Brent Blend, the international oil benchmark, averaged $47 (£30.50) per barrel in August, the lowest monthly average in more than six years.
“The combination of continued supply growth from OPEC (including Iran and Iraq) and still-high output in the US suggests that global crude oil markets will remain well supplied during most of 2016,” the report said.
It expected that a gradual rise in prices would encourage American producers to expand production again but with the OPEC countries’ sustained output these factors would “keep a lid on prices”.
Brent prices were forecast to average $73 per barrel in 2017, far below the levels seen in 2010-14.