Near-term risks abound, but oil should recover in 2016

Brent crude's renewed slide below $40 per barrel was the damning verdict on OPEC's failure to agree on a number even for what is largely a notional output target. In principle, prices could keep falling. As we have noted before, the running costs of an established US shale well can be as little as $20 per barrel, meaning that some production is still profitable above this level. But in practice, we do not expect oil prices to drop much further, or at least not for very long, for three main reasons.