The plunging price of oil has altered all hope of any recovery for the remainder of the year and into 2016 for the energy industry. However, analysts are predicting that oil will come back strong in 2017. This rebound from the oil patches in the U.S. will be an event that will undoubtedly help the industry recover in a big way.
Until then for the remainder of the current year and into next year the industry will continue to make cuts where they are needed to counteract the decline in oil prices. Cuts in spending, employment and cash flow are just some of the necessary actions that energy companies will continue to make in this period. While oil prices are dropping below $60 per barrel, analysts are quick to note that when they do bounce back in 2017 the higher prices will effectively end the downturn.
Raymond James recently downgraded their expectations that stated crude prices would make a comeback later in the current year. This downgrade was a result of the obvious decline in price and the news that more oil is ready to hit the market. Predictions now are stating that the domestic benchmark oil will most likely stay around $50 for 2015. Analysts are also assuming that next year there may be a bump to the tune of $5 per barrel.
These same analysts from Raymond James are saying that two years from now the oil companies will be welcoming a growing demand with open arms.
By then the demand will be at an all-time high. Although it may not reach the 2014 levels of $100 per barrel price, there is no doubt that the price will be just what the doctor ordered for the industry. Energy companies will be glad to put 2015 and 2016 in their rear view mirrors. According to forecasting analysis that is currently being compiled 2017 will bring in a much-needed recovery.
What can be expected for the remainder of 2015 and next year? A tightening of the budget and cash flow is one method companies will utilize to help them stay afloat in the downturn. Less hiring, production projects and development plans will be another casualty. But the layoffs and the slashing in prices will be what the public will mostly notice the most. Spending will be at an all-time low according to Raymond James analysts. All of these cutbacks and decreases in spending have already been estimated to result in 53 percent less spending than in 2014.
A recovery in 2017, according to Raymond James analysis, could be led by a dramatic increase in cash flow and spending. Other industry analysts question this expectation because it is based on the current market. In fact, even a mild change in the market could through off this forecast altogether. It is surprising how a difference of just $5 per barrel could ultimately determine the amount of cash flow and spending that will be available. It could make or break the industry.