Americas News
Crude's 14% H1 Slide Prompt Predictions of Second-Half Comeback
Crude finished June by climbing for a seventh straight session, with West Texas Intermediate on Friday settling $1.11 at $46.04 per barrel and Brent climbing 48 cents to $47.90 per barrel - but while this has inspired some onlookers to forecast a favourable rest of 2017, conservative experts warn not to read too much into crude's recent gains.
Jackie DeAngelis, host of CNBC's Markets Now, noted that "I'm hearing the market could be getting ahead of itself" and added that news of U.S. supplies going down - which helped along last week's gains - are "a drop in the bucket when you think about it longer term."
In commenting about how the seven day streak is being portrayed (at least by Bloomberg) as a good end to a rough June (and a first half of 2017 that saw crude tumbling 14 percent), Brian Battle, director of Performance Trust Capital Partners, said that between U.S. shale and rising production in Iran and other countries, "long term I don't think oil prices are going to hold for long because there's just not enough demand for the outrageous amount of supply that's coming on the market."
But even though reports of inventory drawdowns have typically been followed by disclosures of "surprise" builds, and repeated promises by the Organization of the Petroleum Exporting Countries (OPEC) that a market rebalancing is imminent have been offset by renegade nations pumping full-out, some experts are reiterating old arguments to forecast a rosy future.
Mark Luschini, chief investment strategist with Janney Montgomery Scott, told CNBC, "I think OPEC plus Russia is committed to continue to see draws occur in 2017 and even 2018, and therefore I expect what we're going to see is firming oil prices on the back of investors realizing that the draw is not only occurring but is significant in nature, and therefore that ought to boost profits in the energy space."
He added that prices should hover in the mid to upper $50s, thanks to increasing U.S. shale production being outstripped by riding demand.
Rob Thummel, managing director for Tortoise Capital Advisors, thinks fundamentals "are set up for a second-half comeback": he told CNBC that "You are going to see crude oil inventories globally and domestically begin to decline month after month.
"That will support crude oil prices, boosting the entire sector."
He reiterated the theory that a lack of capital investment in U.S. production will soon lead to an under supply of crude oil, resulting in a rise in crude prices; he even stated that OPEC will deepen its production cuts, despite all signs suggesting otherwise.
Reacting purely to numbers and other data instead of hope and hyperbole, Goldman Sachs last week forecast a three-month average of $47.50 per barrel for West Texas Intermediate, down from its previous estimate of $55.00.
