Analysts, Including Pimco, Believe The Magic Oil Price For Rebalance is $50

Pimco's Mihir Worah says $50 is "the right price over the next couple of years."

Analysts this year have predicted oil prices heading anywhere from the $30s to the $70s and beyond in the near future, but Pimco has determined the price needed to bring about market rebalance, and that number turns out to be an average of the two extremes at $50 per barrel.

Mihir Worah, CIO of real return and asset allocation for Pimco, told CNBC that $50 is "the right price over the next couple of years — we are pretty close to the right price ... that is where supply and demand gets balanced."

If this $50/bbl scenario plays out, Ship & Bunker data suggests it would translate into IFO380 prices staying under $300/mt.

Worah, who also thinks the worst of the commodity correction is over, justified the $50 figure by pointing out that if it rises any higher, "then you start getting incremental supply in the United States; we think somewhere in the fifties is the right price for the next six to 12 months."

The Pimco executive is not alone in his assessment: Malcolm Graham-Wood, the founder of HydroCarbon Capital, this week in his blog described $50 as the "magic" number for crude;  Renaissance Capital believes is it also ideal for Russian energy companies; and Tarek Kabil, minister of trade and industry for Egypt, has gone on record as stating that $50-$55 is the "sweet spot" for his country.

As to when the $50 threshhold is achieved, Phillip Streible, senior market strategist of RJO Futures, believes it is imminent: he told Bloomberg on Wednesday that "I really think oil prices will push up to that $50 level" in reference to the gains made over the past week.

However, Streible also takes the minority view that the Organization of the Petroleum Exporting Countries (OPEC) and other producing nations "will really come together" in September and implement a production cap.

This is something Worah dismisses outright: "As far as the Saudi-Russian OPEC meeting, we think it is just headlines: both the Saudis and the Russians are pumping pretty much as much as they can, so freezing output is fairly meaningless."

Absent from the discussion, however, is the lingering and substantial problem of current oversupply and weakening global demand, and in this regard John Kilduff, founding partner of Again Capital, is convinced oil is headed towards $35 and that the downturn will be "the knockout blow" for many companies.