Oil Prices Won't Begin Recovering until late 2017: Mexico

Mexican energy minister Pedro Joaquin Coldwell says it is "very hard to see how oil prices can rise significantly."

Get set for more industry pain: that's the implied message of Pedro Joaquin Coldwell, energy minister to Mexico, in predicting that oil prices won't recover until the second half of 2017 at earliest.

Coldwell made the prediction at the IHS CERAWeek conference in Houston, where he discussed the oil market with Ali al-Naimi, oil minister for Saudi Arabia.

Coldwell noted that the market is oversupplied by about 2 million barrels per day and considering inventories are steadily increasing, it is "very hard to see how oil prices can rise significantly.

"I believe a price recovery could take a year and half to two years to happen."

He added that Mexico, currently the world's 10th-largest producer, isn't likely to cut output during that period, however, it is willing to participate in a March meeting with Organization of the Petroleum Countries (OPEC) and non-OPEC producers to discuss the output freeze recently proposed by Saudi, Russia, Qatar, and Venezuela.

Pierre Andurand, chief investment officer for Andurand Capital Management LLP who predicted the oil collapse, is slightly more optimistic than Caldwell: in a February newsletter to investors, he said prices will move higher in the second half of this year as inventories stabilize.

Meanwhile, gasoline stockpiles falling for the first time in 15 weeks caused crude to rise to a four-week high on Thursday, and this in turn prompted Kyle Cooper, director of research with IAF Advisors, to remark that "The longer we stay above $30 the greater the chance that we've put in a bottom."

The intense and almost singular focus on OPEC as the vehicle for price recovery dismays analysts such as Stephen King, senior economic advisor for HSBC Holding Plc.

Last November, he argued that even if OPEC cuts production, it would be unlikely to result in a sustainable recovery due to China's slowing economy: "The China slowdown is probably the biggest single influence that is depressing oil and other commodity prices; it's not just a supply-side story."