Americas News
Analyst, COO Foresee Major Drawdowns And Oil Surging To $70 In 2018
The only thing reliable about oil market analysis in the wake of the Organization of the Petroleum Exporting Countries (OPEC) cutback deal ratification is that for every negative forecast offered by analysts, there is an equal and opposite reaction – and on Thursday that reaction was provided by Pioneer Natural Resources Co., which predicts crude will surge to $70 per barrel in 2018.
Pioneer chief operating officer Tim Dove says the surge will be caused by the global glut finally being consumed and an increase of production in the Permian shale basin.
He told Bloomberg markets that while oil moving in the beginning of 2017 will be in the range of $45-$55, "by the time you get to the end of 2017, the curves cross: you have demand that's ratcheted up by then ... you've had [OPEC cutback) compliance to the extent there's compliance, and all of a sudden you have inventory draws happening: that bodes for a really strong 2018," with oil "$65-$70-ish."
As a result, he says his company hasn't hedged much for 2018, betting that prices have room to run beyond their jump in the past two weeks: "We think there's a chance that `18 can be better."
Pioneer is reportedly following through with its plans to operate 17 drilling rigs in the Permian and expects to increase output by 15 percent per year through 2020.
Meanwhile Barry Dawes, executive chairman of Martin Place Securities Pty Ltd., told CNBC that in the shorter term he is expecting oil in "the high $50s, maybe as high as $60 by the end of the year…and I think next year we might actually find an average price closer to $60 than $50."
When asked if he's optimistic about OPEC following through on its cutback agreement even though it's ramping up production in a bid to cut at the highest level starting in January, Dawes skirted the question by replying, "I think Saudi Arabia and many of these other players will take part in the cuts…I think certainly for the first three months they'll try and do that because the cuts in supply have actually given a higher price, so the revenue is rising."
When asked when he thought a true market rebalance might occur, Dawes replied, "we're really very close to balance now; we saw 1.5 million barrels per day [bpd] extra consumption in 2016, and I'm looking for that 1.3 million bpd in 2017….so I think we'll see more inventory drawdown."
As optimistic as Dove may seem to critics, it doesn't match the optimism of John Hess, CEO of Hess Corporation, who recentl;y told CNBC that the ratified OPEC cutback deal and U.S. president-elect Donald Trump's focus on oil and gas production will lead to a significant rise in prices in the near future - with $80 not being out of the question.
