ANKARA

By Ovunc Kutlu

Oil prices may increase to $60 per barrel by 2017, according to a recent report by London-based Capital Economics. 

With low global demand, glut of supply, slowdown in Chinese economy and OPEC refusing to trim output, oil prices have reached their lowest point since 2004. However, a recent report suggests that they could rebound to reach higher levels due to production cuts in the U.S.

"We continue to expect the price of Brent, currently around $33 per barrel, to recover to $60 in 2017 and $70 by 2020," said the report titled 'A decade of two halves for oil prices' by Capital Economics, which was authored by the independent macroeconomic research center's Head of Commodities Research Julian Jessop and Commodities Economist Thomas Pugh. 

"Production in the U.S. and elsewhere should fall more sharply as existing wells are exhausted and price hedges expire...Investment has already been cut aggressively and production will inevitably follow," the report explained. 

Due to low oil prices, oil producers in the U.S. have cut their output. Domestic oil production in the country decreased recently to 9.2 million barrels per day, or around 400,000 barrels a day on average, from 9.6 million barrels per day in April 2015 when it peaked at its highest level since the 1970s. 

Meanwhile, the number of oil rigs in the country, which indicates the well-being of the domestic oil sector, fell by 68 percent in the last 15 months to reach 516 last week, after reaching its highest level of 1,609 in October 2014. 

Both figures suggest that domestic oil production in the U.S. could fall sharply this year, trimming the oversupply and pushing prices higher. 

Russia in trouble

Meanwhile, plummeting prices continue to negatively impact the countries that are dependent on crude sales and exports to generate revenues for their economies. 

"Russia, Canada, Norway, Venezuela and Saudi Arabia are the countries that are most affected by the plummeting prices," Gizmen Nalbantli, head research analyst at foreign exchange company IsikFX in Turkey, told Anadolu Agency. 

Stating that the Saudi economy has seen serious erosion with falling oil prices, Nalbantli said "It is disturbing to see a budget deficit in the Saudi economy where non-oil exports are falling, while it is rumored that the country can go bankrupt in five years."

The expert said Russia leads countries that are most affected by plummeting prices since almost 70 percent of its export income is generated from oil and natural gas exports. 

"Taxes from oil and gas constitute around 50 percent of tax revenues in Russia. Low oil prices also impact public finances negatively in the country," he added. 

The world's highest crude oil reserve holder, Venezuela, is also in trouble. 

"Venezuela is having a hard time meeting its high public spending and debt. This has led to fears of political instability and bankruptcy when 95 percent of export revenues depend on oil," Nalbantli said. 

He added that Norway is also affected negatively from oil prices, since net energy exports constitute 22 percent of gross domestic product in the country. Meanwhile oil producers in western Canadian provinces are also troubled with low oil prices.