EMEA News
Syria Could Be Key To Oil Freeze Deal, But Fundamentals Wouldn't Change Much: Kilduff
About the only way the recently forged Russia/Saudi Arabia pact to stabilize the oil market could work is in the highly unlikely event a deal on Syria is achieved by the U.S. and Russia, writes John Kilduff, founding partner at Again Capital, in a new CNBC commentary.
Kilduff, who spent most of the commentary expounding on the futility of the pact, credited the two nations for knowing "how to play to their audience: Saudi comments kicked-off a nearly $12 rally in crude oil prices last month; so, they keep rolling out the sequels."
But he observed that while the low price environment is increasingly "driving this disparate group into each other's arms, the divide and distrust among them is just too great to overcome"; moreover, if a stabilization were to be achieved in the near-term, it would "only revive the shale oil industry even more than it has already, with the price rally back above $40 per barrel."
Kilduff's thinly-veiled suggestion that market investors are being played for suckers by empty promises of stabilization from Organization of the Petroleum Exporting Countries (OPEC) was followed by yet another round of market forecasts, all of them made to CNBC.
The most optimistic was from Timothy Dove, COO of Pioneer Natural Resources, who declared, "I can easily see a case where we get into the $50s and $60s next year"; he believes prices must climb to this level "to replace the 5 million barrels per day of production that is not happening in the current production climate."
More bearish is Chris Brankin, CEO, TD Ameritrade Asia, who insists that oil will not break out of the $40-$50 range until global demand recovers; he added, "I don't think anyone trusts that OPEC can come to some type of solution."
Christof Ruehl, global head of research for Abu Dhabi Investment Authority, agrees, noting that the "massive" overhang of inventory means "we'll have to wait a while, probably two years," for it to clear and for a true stabilization to occur.
Seth Kleinman, the head of European energy research at Citigroup, added that meanwhile, given that we're in a "no man's land" of oil prices, "the market's going to get whipped around by whether it's a big move in the dollar or a headline about a not particularly significant [freeze] agreement totally devoid of details."
In a market that is particularly prone to speculation, it should come as no surprise that Renaissance Capital this week made the grandest prediction of all by suggesting the ongoing market woes may trigger a wave of democratization globally.
Charles Robertson, chief economist, stated in a report, "We wonder if the 2014-2015 oil price fall may provoke similar democratization in Russia, Iran and Venezuela in 2018-2020" - this is in reference to so-called democratization in Mexico, Algeria, and the former Soviet Union between 1988 and 1990 due to the market collapse of 1985.
Presumably, Kilduff, who has led the charge in stressing that only fundamentals and not talk can rebalance the market, retains his frequently-expressed position that prices may easily correct back to the $35 range if oversupply gets any worse.
