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%