The oil crash is in its final days.
Crude oil prices have staged a strong comeback by about 58% in the last five weeks. They’re still down by about the same amount from the pre-crash level in June 2014.
And Scott Minerd, global chief investment officer at Guggenheim Partners, thinks that the crash is finally near its end.
That’s because oil producers outside of the 12-member OPEC cartel could continue to reduce production under the strain of low prices.
Meanwhile, demand is expected to increase. The International Energy Agency’s latest forecast predicts that global oil demand will grow by 1.6 million barrels per day in 2016.
“The supply/demand imbalance in the oil market — the root cause of falling oil prices — is likely to change in 2016,” Minerd told Business Insider for our latest collection of Wall Street’s Most Important Charts. “On the demand side, world demand growth, supported by cheaper prices, should erode the majority of the surplus and help bring the market into balance by the end of the year.”
“Looking at the market fundamentals in place, I believe we have reached a new point in the global energy story: The endgame in the decline of the price of oil,” he said.
But it’s likely to be a slow, painful recovery. On Monday, Schlumberger — the world’s largest oil driller — put out a bearish presentation on the industry’s outlook. CEO Paal Kibsgaard said he does not expect any meaningful improvement in drilling activity until 2017.
But on oil prices, he said: “The latest data points have, in recent weeks, sent the oil price up towards $40 per barrel and we would expect the upward trend to continue as the physical balances tighten further in the coming quarters.”