Americas News
Analysts in the Wake of Oil Falling Yet Again Say $35/bbl in the Near Future is Possible
As oil on Tuesday began its slide to what would end as the lowest settlement in over two weeks, the analytical community stopped talking about prices hovering between $55 and $60 in the near term – which was the general consensus of most experts – and began worrying that they might plummet to $42 or even $35.
West Texas Intermediate fell 84 cents to $52.17 per barrel, the lowest close since January 19, and Brent fell 67 cents to $55.05 per barrel.
The losses this time were attributed to an American Petroleum Institute report showing that U.S. crude inventories rose 14.2 million barrels last week and gasoline climbed 2.9 million barrels; insiders fear this will soon be followed by the Energy Information Administration reporting crude stockpiles rising for a fifth week.
John Kilduff, founding partner of Again Capital, led the charge in predicting further losses; in a Bloomberg podcast he said crude could trade as low as $42 over the next couple of weeks.
When asked to give the bird-eye view of the market, Kilduff replied, "The demand picture has been rather soft, especially for refined fuels. Some of it is a drop in exports, but another part is consumer response to higher gasoline prices."
He said, "Part of it is being driven by the Chinese who sort of ramped up a mini boom in refining there, which led to record exports for most of last year, so the whole world kind of got swamped with refined products."
He added that while the Organization of the Petroleum Exporting Countries (OPEC) should be credited for making a real effort to curb production, rogue members such as Iran severely compromise any gains achieved via the cutbacks.
Philip Verleger, president at PKVerleger, is even more downbeat than Kilduff: he predicted that if OPEC stumbles in its output cuts and if the border-adjustment tax proposed by U.S. president Donald Trump falters, "we're set up for probably the hugest sell off of crude in history; right now open interest has come up 11 percent since the [U.S.] election, and we're on track to having almost 8 million contracts by the end of the year if this rate continues.
"This is a bubble, and if OPEC or the ways and means committee fails, it's going to pop ... [prices] could go down to $35 if all the confidence went out."
After becoming an unlikely booster of the OPEC cutback agreement, it seems that Kilduff has returned to the more familiar turf of insisting that oil could easily trade at dismally low prices: he spent most of 2016 predicting oil in the $30s, and at one point he argued that the global glut alone could push prices down to $25 per barrel.
