Vienna Will Result in $38-$60 Oil, No Change in the Glut, and More Volatility next Year: Analysts

by Ship & Bunker News Team
Thursday November 24, 2016

Helima Croft, head of commodity strategy for RBC Capital Markets, says oil may well return to $50 next week on the strength of a successful Organization of the Petroleum Exporting Countries meeting to curb oil production next week – but don't expect it to go any higher.

That's because Saudi Arabia wants "a muted recovery," she explained in a note, adding that the Saudis "keep talking about $50 oil because I think they are concerned that if this rises too fast, you'll get U.S. production roaring back."

Equally important, she thinks the kingdom is striving for $50 oil to stay on track to achieve its long-desired 2018 IPO listing for Saudi Aramco, the world's biggest oil company – part of an overall strategy to diversify the ailing Saudi economy.

Bob Iaccino, co-founder of Path Trading Partners, expressed his frustration about the hyperbole over the cutback deal to Bloomberg by saying, "I don't know what the duration of this agreement is going to be, what the terms to implement will be, or what the enforcement is going to be."

He added that "I don't think you'll see a cut" from either Iran or Iraq given the reasons for them not wanting to play ball (the former wanting to re-establish itself fully on the international market and the latter needing high production to fight against ISIS).

Iaccino said if the deal isn't ratified, the downside for prices  "is easily $40 .. and $38 as the spike low."

More importantly, he concluded that on the upside "If {prices] get up to $60 I would sell that very, very hard, because the glut is here to stay."

He concluded, "2017: more volatility, but you sell the rally."

For bunker buyers, Ship & Bunker data indicates this range for crude suggests we could see IFO380 bunker prices break into the $300's in the primary ports, and as high as $350/mt on the upside.

On the downside, buyers could again be seeing indications for bunkers as low as $200/mt.

Earlier this week, a contrary view was offered by Jeff Currie, global head of commodities research for Goldman Sachs, who said that while the cutback deal may be a gesture, it could actually lessen market volatility.