EMEA News
United Arab Emirates and Others Predict $60 Oil This Year
Even though it still won't be enough to allow high output Organization of the Petroleum Exporting Countries (OPEC) members to balance their books, several high-ranking experts this week stated that oil prices will climb to over $60 this summer.
Based on current trends, Ship & Bunker data indicates that $60 crude would put IFO380 bunkers in the primary ports at $270 to $295 per metric tonne (pmt), compared to Ship & Bunker's Global 20 Ports Average which sat at $238 pmt at the end of May.
Sultan bin Saeed Al Mansoori, economy minister for the United Arab Emirates, said at an Abu Dhabi conference that "It's possible for oil prices to reach $60 or more during this summer" as demand increases in the U.S.; this echoed remarks made previously by Mario Maratheftis, global chief economist for Standard Chartered, who predicts that oil will end the year at higher than $60.
This is considerably more than the recently upgraded estimates of investment banks surveyed by The Wall Street Journal, which predicted that Brent crude will average $43 per barrel this year (up $2 from the Journal's April's survey) and West Texas Intermediate will average $41 per barrel in 2016 and $55 in 2017.
Nonetheless, the predictions, which are inspired in no small way by the supply disruptions in Canada and Nigeria as well as the decline in U.S. crude inventories, have caused critics to muse that the market is relieving the pressure on OPEC members to address the global glut and market imbalance at their Vienna conference on Thursday.
Doug King, chief investment officer at RCMA Asset Management, remarked, "The market is conspiring to help OPEC; If I was in the Saudis' shoes right now, I'd be pretty happy."
Still, it's not all smooth sailing for the troubled cartel: earlier this week it was revealed that with oil prices at $50 per barrel, many members are losing money pursuing the Saudi Arabia-led market share first strategy - and even $60 per barrel won't solve the problem: for example, Algeria needs a price of $87.60 to balance its budget; Iran needs $61.50; Libya, Nigeria, and Venezuela need prices above the $100 mark; as for the Saudis, they need $66.70 to balance the books.
Moreover, analysts warn that the current supply disruptions are only temporary, and this coupled with Iran and Iraq boosting their output will flood the market with yet more crude.
Citicorp cites another problem waiting in the wings for OPEC, namely U.S. oil fields that are peppered with drilled wells that haven't been activated, and which the bank says are now poised to be profitable at $50 per barrel (although this is disputed by Tom Ward, co-founder of Chesapeake Energy, who pegs the figure at $75); this could result in 400,000 barrels per day of new output.
Sultan Al Mansoori and Mario Maratheftis aren't the first pundits to predict $60 oil for the near future; that honour goes to Pavel Malchonov, analyst at Raymond James, who in February stated that oil prices will double within a year due to non- OPEC member countries adapting to current prices by severely under-investing – which in turn will rebalance the market.
