The road ahead for oil prices

INDONESIA, along with other countries, is poised to benefit from the direction in which oil prices are moving. They should help stabilise the international economy as well. After falling relentlessly through 2015, oil prices initially rebounded in early 2016. Then they fell again, only to edge back up again in recent days.

Forecasting their direction has been a formidably difficult task. Yet, we need to have some sense of where they are headed. They matter for the health of the world economy, for government finances, and even for political stability in some countries.

The factors at work are the prospects of oil supply, demand for oil, and the political risk premium. These suggest that prices may enjoy a modest uptick but not more. Much will hinge on the meeting of the Organization of the Petroleum Exporting Countries (Opec) on Nov 30. The key question is: Will it agree on a plan t…