Brent Seen by UBS Dropping Near $30 Before 2016 Market Rebalance

How Will Geopolitics Impact Oil Prices?
  • Commodity prices may fall another 10% on oversupplied markets
  • Crude poised to recover toward year-end as supplies tighten

Brent oil may decline near $30 a barrel before a reduction in U.S. output helps rebalance global markets in the second half of the year, according to UBS Group AG.

QuickTake Oil Prices

Commodity prices may drop another 10 percent because of oversupplied markets, said Dominic Schnider, head of commodities and Asia-Pacific foreign exchange at UBS’s wealth-management unit in Hong Kong. Oil’s advance Monday after Saudi Arabia cut ties with Iran could last a week or two, he said.

“What we are gonna see in the first half of 2016 is that U.S. production, year on year, will start to decline,” Schnider said in an interview with Bloomberg Television’s Haidi Lun. “Once you see that happening, the market will become more comfortable, the prices actually can stabilize.”

Brent lost 35 percent in 2015, declining for a third year. Prices on Monday rose 2.4 percent at $38.17 a barrel at 12:26 p.m. in Tokyo as Saudi Arabia cut ties with Iran a day after its embassy in Tehran was attacked to protest the Saudis’ execution of a prominent Shiite cleric.

The global oversupply worsened last year as U.S. stockpiles rose more than 100 million barrels, the largest annual growth in Energy Information Administration data going back to 1920, and the Organization of Petroleum Exporting Countries abandoned output limits to defend market share.

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