Financial Professionals Say Oil Has Further to Fall, But Warn $30 Per Barrel Would Signal Global Recession

NEW YORK, Jan. 21, 2015 /PRNewswire/ -- Convergex, an agency-focused global brokerage and trading related services provider, has released the results of its Oil Impact Survey, quantifying financial industry sentiment about the ongoing decline in global oil prices. The survey was conducted from January 13 to January 15, 2015. The results reveal a belief that the decline in oil prices to date has been good for the U.S. economy, but warn of a further drop that will have more negative consequences, with a majority of respondents identifying $30 per barrel as the price that would signal a global recession was inevitable.

Respondents overwhelmingly believe that oil prices, as measured by light crude oil (WTI), will continue to fall in 2015, with more than two-thirds (68%) saying they do not believe prices have yet reached a bottom. Investors expect a rebound before the end of 2015, with forty-three percent (43%) predicting a final price per barrel between $40 and less than $60, and forty-two percent (42%) predicting a final price between $60 and less than $80. But these figures represent a significant decline from early December, when a Convergex survey* found eighty-nine percent (89%) saying oil would end 2015 above $60 (the level at the time of the survey), and nearly half (47%) expected a final price of $80 per barrel or more.

Respondents named individual energy stocks (44%) as the investment vehicle of choice once oil prices have bottomed, followed by energy sector ETFs (30%).

A majority of those surveyed say current oil prices have had a positive or very positive impact on U.S. price levels generally (53%, versus 28% negative/very negative) and the U.S. economy overall (66%, versus 22% negative/very negative). Investors were split on the effect on the U.S. labor market, with 39% seeing a positive or very positive impact, and 36% seeing a negative or very negative impact.

But investors predict a different result should prices continue to decline, with fewer respondents predicting a positive or very positive impact on general price levels (49%) and the U.S. economy overall (53%) than at current oil prices. A majority of respondents (55%) see a negative or very negative impact on the U.S. labor market if oil continues its drop, while just thirty-two percent (32%) see a positive or very positive impact.

"In just one month, financial industry professionals have dramatically lowered their expectations for oil prices in 2015," said Nicholas Colas, Convergex chief market strategist. "While investors say that the drop in oil prices has been a net positive thus far, their forecast is less sunny. We have here a clear warning of the impact if prices continue to fall – and our respondents think they will."

For more information on the Convergex Oil Impact Survey, click here.

*Convergex's 2015 Forecasts Survey, December 2014

Calling a Bottom
Do you believe oil prices have reached a bottom?

• Yes – 20%
• No – 68%

Once you decide that oil prices have bottomed, how will you express that point of view in your investment process? Invest in...

• Individual Energy Stocks – 44%
• Energy Sector ETFs – 30%
• Invest in Other ETFs – 3%
• Invest in Energy Futures – 6%
• I will not invest in the Energy Sector – 10%
• Other – 7%

Price Performance
What will the price of Crude Oil (WTI) be per barrel at the end of 2015?

• $100 or more – 1%
• $80 to less than $100 – 7%
• $60 to less than $80 – 42%
• $40 to less than $60 – 43%
• Less than $40 – 8%

Declaring Danger
What price per barrel of Crude Oil (WTI) will signal that a global recession is inevitable?

• $41 to $45 – 2%
• $36 to $40 – 15%
• $31 to $35 – 20%
• $26 to $30 – 31%
• $21 to $25 – 12%
• $16 to $20 – 12%
• $15 and below – 7%

Oil's Impact
If oil prices stay where they are today, what impact will there be on the following?

• U.S. LABOR MARKET
  • Negative/Very Negative – 36%
  • No Impact – 26%
  • Positive/Very Positive – 39%
    
• U.S. GENERAL PRICE LEVELS
  • Negative/Very Negative – 28%
  • No Impact – 19%
  • Positive/Very Positive – 53%
    
• U.S. ECONOMY OVERALL
  • Negative/Very Negative – 22%
  • No Impact – 12%
  • Positive/Very Positive – 66%

If oil prices continue to drop, what impact will there be on the following?

• U.S. LABOR MARKET
  • Negative/Very Negative – 55%
  • No Impact – 14%
  • Positive/Very Positive – 32%
    
• U.S. GENERAL PRICE LEVELS
  • Negative/Very Negative – 39%
  • No Impact – 13%
  • Positive/Very Positive – 49%
    
• U.S. ECONOMY OVERALL
  • Negative/Very Negative – 39%
  • No Impact – 8%
  • Positive/Very Positive – 53%

Methodology
The Convergex Oil Impact Survey was performed by Convergex via an online survey of financial industry participants, resulting in 306 respondents. The survey was conducted from January 13 to January 15, 2015, and has a margin of error of +/-10% and a confidence level of 90%. Respondents included buy-side firms (asset managers, hedge funds), sell-side firms (banks, broker-dealers), trading venues, service providers and other financial industry participants. Rounding of decimal results may produce totals over or under 100% (by 1%).

About Convergex
Convergex is an agency-focused global brokerage and trading related services provider that takes on the industry's toughest challenges, from complicated trades to complex businesses.  With clients' interests as the top priority, Convergex delivers comprehensive solutions that span global high-touch and electronic trading, options technologies, prime brokerage, clearing, commission management and beyond. Headquartered in New York with a presence in several other locations including Atlanta, Boston, Chicago, Orlando, San Francisco and London, the company serves nearly 3,000 clients accessing over 100 global market centers. Convergex provides brokerage services primarily on an agency basis, but may operate in a riskless principal and/or net trading capacity, and in connection with certain ETF or ADR transactions, may act as principal or engage in hedging strategies with such transactions. Convergex does not engage in market making or investment banking activities, other than as a selling group member.

In the U.S., Convergex offers products and services through Convergex Execution Solutions LLC (member NYSE/FINRA/SIPC); G-Trade Services LLC (member FINRA/SIPC); Westminster Research Associates LLC (member FINRA/SIPC); Convergex Depositary, Inc., and Convergex Solutions LLC, of which Connex, Jaywalk and LDB are divisions.

In London, Convergex operates through Convergex Limited, which is incorporated in England and Wales (registered with company number 06262150). Convergex Limited is authorized and regulated by the Financial Conduct Authority (FCA) of the United Kingdom.

The material, data and information (collectively "Convergex Information") that is available from Convergex is intended for institutional investor use only; is for informational purposes only; is subject to change at any time; is not intended to provide tax, legal or investment advice; and does not constitute a solicitation or offer to purchase or sell securities. Convergex Information is believed to be reliable, but Convergex does not warrant its completeness or accuracy. Clients should read their agreement with Convergex carefully as it contains important information and disclosures about the product or service covered by it. (Rev. 12/2/14)

Please be advised that options carry a high level of risk and are not suitable for all investors. To receive a copy of the Options Disclosure Document, please contact the Convergex Compliance Department at (800) 367-8998.

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