Oil to Remain Under $60 for the Next 2-3 Years Amid Increased Production: Gheit

West Africa is the latest region to report increased production as a result of the OPEC cutbacks.

With the analytical world of late pegging oil prices at anywhere from $30 to $100 in the foreseeable future, Fadel Gheit, senior energy strategist at Oppenheimer & Co., joins the growing ranks of experts who think a truer number is $60 - but that it will take two to three years before this becomes the "new normal".

Speaking on Bloomberg television, Gheit remarked that "I do believe oil prices will continue to rise, but we're not going to see the same gain we saw last year [when] oil prices almost doubled from January to December; we're not going to see that again.

"We're probably going to see $2 to $3 increases in prices until over the next two to three years we're going to get what I believe will be the new normal ,and it's going to be about $60 per barrel; it's not $90, it's not $100, but it's not $30 either."

Gheit's so-so forecast amounts to yet another understated message that contrary to the persistent rhetoric from participants in the Organization of the Petroleum Exporting Countries (OPEC) cutback agreement, a temporary 1.2 million barrel per day (bpd) reduction will not solve the global glut or bring about sky-high prices.

In fact, Gheit's prediction, which has been echoed by some OPEC members and many conservative analysts, could be regarded as optimistic, if developments in West Africa are any indication: Bloomberg reported that West African oil producers will in February will send 2.19 million bpd of crude to Asia, the most amount in at least five years; China and India are said to be the biggest buyers.

Three traders told Bloomberg that the figure may further increase because Trafigura Group and Vitol Group still hold cargoes totaling 3.74 million barrels, which are also likely to be shipped to Asia.

Ehsan Ul-Haq, principal consultant at KBC Advanced Technologies, explained that the OPEC cuts have led to the shortage of Middle Eastern oil in Asia, and "as a result, regional refiners have been forced to buy crude from the west."

While increased U.S. output as a result of the cutback initiative has always been regarded as a trigger for retaliatory increased Middle East production, in the bigger picture it's difficult to imagine that more output from West Africa, along with OPEC members such as Nigeria, Iran, and Libya determined to increase their output and Russian production anticipated to reach record highs after the expiry of the OPEC agreement, will do anything to boost prices - certainly not greater than the amount Gheit anticipates.

Still, there are a considerable number of experts who maintain that fundamentals will soon shift favourably, case in point: Fatih Birol, executive director of the International Energy Agency, who recently said a "significant" supply-demand gap is possible in as early as three years.