World News
Crude Will Hit $85 by End of 2016: Cornerstone Analytics
Many analysts have pointed to the latter part of this year as a turning point for the beleaguered oil sector, but Mike Rothman, founder and president of Cornerstone Analytics, has put a number value to it: $85 per barrel by the end of 2016.
Ship & Bunker data indicates that such a prediction would, based on current trends, translate to IFO380 bunkers in the primary ports in the $300 to $400 per metric tonne (pmt) range.
Speaking to CNBC's Squawk Box, Rothman rationalized his price prediction by stating, "You have two things going on here this year: one is demand growth and the other is contraction of non-OPEC supply, the first time in about eight years."
CNBC notes that Rothman's estimate, which is nearly double what some observers on Wall Street have been forecasting, is based on a law of economics whereby increased demand at a time of shrinking supply bolsters prices.
Rothman's prognostication was greeted by good-natured skepticism from Squawk Box commentators, but he defended the accuracy of his outlook by pointing out that last November during the Organization of the Petroleum Exporting Countries' annual meeting, "the Saudis thought the [oil] price was going to stop at $60, and I said the next price down is cash operating costs, which we all estimate is $30 and $40 – and they thought that was crazy."
However, Rothman downplayed the notion that a price rebound would lead to what he called "commensurate reaction in the U.S.," pointing out that "shale is a very short life resource."
In a separate interview, Bob Doll, chief equity strategist for Nuveen Asset Management, said that while the culprit for stock market performance last year was the rising dollar and falling oil, this year with the declining dollar and rising crude prices "we'll start to see positive earning revisions."
Rothman seems to be even more optimistic about oil's near-term future than Pavel Malchonov, an analyst for Raymond James, who in February stated that oil will reach at least $60 per barrel even if OPEC does nothing to curb production - an estimate due to non-member countries adapting to current prices by severely under-investing, which in turn will rebalance the market.
Key Bunker Prices More
| VLSFO | MGO | |||
|---|---|---|---|---|
| $/mt | +/- | $/mt | +/- | |
| Singapore | 624.50 | 1.00 | 732.00 | 8.50 |
| Rotterdam | 571.00 | 3.00 | 758.00 | 16.50 |
| Houston | 591.50 | 4.00 | 760.00 | 5.50 |
| Fujairah | 629.00 | 0.50 | 877.50 | 3.00 |
| Global 20 Ports Average | 637.00 | 0.00 | 819.00 | 3.00 |
| Global 4 Ports Average | 604.00 | 0.00 | 782.00 | 5.50 |
| Global Average Bunker Price | 688.00 | 2.50 | 879.00 | 1.00 |
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