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Monday 5 December 2016

Pimco calls end of oil price slump

David Stringer

Published 11/10/2015 | 02:30

The worst of the collapse in commodities prices is probably over, with oil poised to gain over the next 12 months, according to Pacific Investment Management. Just don't expect a major rebound.

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Producers are shelving projects and scaling back output from Arctic oilfields to Indian aluminum mills amid the weakest returns from raw materials since 1999.

While the response may help draw a line under the rout, prices are set to remain "lower for longer" because of excess inventories, according to Pacific Investment (Pimco), which manages $15bn in commodity assets.

"The declines in commodity prices are largely behind us," according to Pimco's Greg Sharenow and Nic Johnson. Pimco has about $1.52 trillion under management. "Most prices are well into the marginal cost curve across metals and oil, and that will help to put a floor under prices here."

Oil may rise to a "baseline" of about $60 a barrel in one year's time as the impact of supply cuts becomes more evident from early 2016, according to Sharenow.

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