Long-term crude prices are falling fast, with June 2017 futures (Nymex Light Crude – CLM2017) having broken through its medium-term target of $50/barrel*.
* Target calculation: 56 – ( 60 – 54 ) = 50
The August 2015 Report from the International Energy Agency indicates that oversupply is growing. After the latest market turmoil, IEA estimates of global demand are also likely to be revised downward. Maybe that long-term target of $36/barrel** is not so crazy after all.
**Long-term target: 66 – ( 90 – 60 ) = 36
At $36/Barrel these prices are way below those needed by countries such as Russia, Venezuela, Norway, Saudi Arabia, etc. to avoid economic stress! How will this play out on the world markets?
The impact on Russia is not likely to be as severe as in 1998 when they were pegged to the dollar. Now a floating exchange rate will help cushion the blow. Same applies to the other commodity-rich economies, including Australia. They are likely to survive provided their currency is not pegged.