Calgary

Oil price unlikely to recover until second half of 2016

The continued glut of oil on the market from OPEC and Russia will keep the price of oil low for several more months, according to some analysts.

Oil prices not expected to recover until the last half of next year

Todd Hirsch, chief economist at ATB Financial, says we likely won't see prices above $50 or $60 until the latter half of 2016, but there's a lot that can happen between now and then. (CBC)

The continued oversupply of oil on world markets — both from  the Organization of Petroleum Exporting Countries (OPEC) and Russia — means the price of oil is not expected to recover for some time.

"It's more a realization that the supply glut that we've been living with for 14 to 16 months, depending on what you define it as, is not going away any time soon," said Kevin Birn, with the global think-tank IHS Energy.

Oil slipped below $38 U.S. a barrel this week for the first time in six years after OPEC  revealed it wouldn't pull back on production. Russia has also increased production, setting a record in October.

"I think the reality that you're seeing in the oil markets today is the realization that this oversupply situation is one that's going to be with us for some time going into 2016 as well," said Birn.

'Tough slog'

ATB economist Todd Hirsch says the continued low price of oil will mean lower cash flows and will probably push back some forecasts on oil reaching $50 or $60.

"My economics team at ATB yesterday, in fact we were trying to do some, a bit of forecasting. Our likeliest case scenario is that oil will return to about $60 by the second half of 2016." said Hirsch.

However he says this week's low oil prices won't make a lot of difference to energy companies that have already made cutbacks or dropped projects.

"It could be another six to eight months at least before we see prices that good. So it is going to be a bit of a tough winter and a tough slog for Alberta — particularly the energy industry," he said.

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