Americas News
Oil at $60 Is Small Potatoes: Try $70 or Even Above $100, Say Experts
Yet another take on the immediate fate of oil prices was offered at the end of last week, this time from Tom Ward, CEO of Tapstone Energy, who told CNBC that oil will not plummet to the $40-$30 mark as some prognosticators fear, or even rise to $60 as many more think; instead, he believes oil will skyrocket to $70 per barrel.
Should that happen, Ship & Bunker data suggests that would increase the price of key grade IFO380 in the primary ports by some $90 per metric tonne (pmt) above Friday's level of $252 pmt.
Ward bases his prediction on the state of production in the U.S., explaining that "There's no increase in the capital spending, the debt side of the business is closed, and so until we have something fairly dramatic happen like maybe a doubling of the rig count, I don't think we can grow production in the U.S."
Therefore, "I wouldn't be surprised at all if we saw above $60 or even $70 by the end of the year."
While $70 oil may strike some as unlikely given that prices seem stuck at the $50 mark of late, Harold Hamm, founder of Continental Resources, also thinks oil will reach $69 to $72 per barrel by the end of 2016.
But even the $70 level is small potatoes for some optimists: Bloomberg reports that investors are buying contracts that will only pay out if crude rises above $100 a barrel over the next four years.
Francisco Blanch, head of commodities research at Bank of America Merrill Lynch, explained, "Some hedge funds are betting that oil prices will need to rise sharply to bring demand down again; that's why they are buying deep out-of-the-money call options."
Ward also echoed the sentiments of U.S. energy insiders that despite what some observers recently hoped for, current prices are not enough to spur a significant resurgence in shale activity: "I think prices will have to move up even higher than we're talking about for there to be a big change in the rig count.
"We can't change the decline of the oil production in the United States without more capital, and right now that's just not available."
Earlier this year, Ward pointed out that the logistics of U.S. production are such that oil has to reach about $75 per barrel before most drillers ramp up production.
