PIRA Predicts End of Oil Rout and a "New Anchor" of $50 Prices This Year

Gary Ross says $50 "is going to become the new anchor for global oil prices."

A leading New York-based analyst believes the bottom of oil prices has been reached and the market’s long rout will soon be over with a price equilibrium of $50 per barrel being established.

Gary Ross, founder and executive chairman of PIRA, first shared these sentiments with clients last month and this week told Reuters that the $50 recovery will happen by the end of this year, supported by Russia and members of the Organization of the Petroleum Exporting Countries (OPEC) following through on their much-ballyhooed promise to freeze production at January levels.

He said, "They want $50 oil, this is going to become the new anchor for global oil prices.

"While it may not be an official target price, you’ll hear them saying it; they’re trying to give the market an anchor."

Based on current trends, $50/bbl oil would likely to result in IFO380 bunkers in the $250 to $300 per metric tonne (pmt) range.

While Ross agrees with many other analysts that the Russia/OPEC proposal will do little to help the glut in the global oil market, he thinks it's a positive start that "could lead to eventual cuts."

But the wild card in Ross's optimistic scenario is Saudi Arabia, which not only has not made any public comment about the possibility of establishing $50 as an oil price base but sent mixed signals about its participation in the Russia/OPEC proposal.

Reuters notes that Ross was amongst the few analysts who correctly anticipated OPEC’s 2014 decision to let oil prices fall and more recently predicted that U.S. crude prices would drop below $30 in February.

If Ross' latest prognostications prove correct, they would match those of Emmanuel Kachikwu, minister of state for petroleum resources for Nigeria, who early this month told attendees at an Abuja conference that "Both the Saudis and the Russians, everybody is coming back to the table" at that date, and that producers overall are seeking a crude price recovery in the neighbourhood of $50 per barrel.