Abu Dhabi’s Biggest Bank Says U.S. Oil Prices May Drop to $20

  • NBAD Says low prices to stimulate crude oil demand growth
  • Almost all regional oil exporters facing deficits this year

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Oil prices may drop to near $20 a barrel this year as the global glut of crude persists into 2017, Abu Dhabi’s largest lender said.

U.S. benchmark West Texas Intermediate crude should trade in a range between $25 a barrel and $45 a barrel for the rest of the year, “although a very brief spike down towards $20 is possible,” the National Bank of Abu Dhabi PJSC wrote in its Global Investment Outlook 2016 report on Sunday. Prices at the lower end of the range will stimulate demand growth, it said.

“For at least the next few years there do appear to be solid fundamental reasons why oil prices are likely to remain in a trading range,” NBAD analysts wrote in the report. Producers have sold less of their crude this year through forward transactions than in past years, and forward-selling would likely accelerate if prices rallied much above $40 a barrel, the bank said.

Abu Dhabi is the capital of the United Arab Emirates, which holds about 6 percent of the world’s oil reserves. Almost all regional oil exporters are set to register “twin deficits” on both their current and fiscal accounts for last year and this year, NBAD said. WTI prices dropped about 40 percent in the past year.

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