Americas News
More Downside Seen for Oil, but Statoil Sees $60 In the Foreseeable Future
With the market posting another round of weekly losses comes the inevitable: opinions about where prices are headed; however, this time out the opinions differ only in tone rather than reflect fundamentally contrary views.
Scott Bauer, senior market strategist at Trading Advantage, told Bloomberg television that Friday's modest crude price gains are merely a result of "some short covering; we're in this new trading range now.....of $42 to $45....."
He warned, "If we break $44.50 in Brent and $42 in West Texas Intermediate....the next support is $39."
Bauer's analysis almost matches that of Daniel Yergin, vice chairman of IHS Markit, who earlier this week said that the June 22 showing of $42.53 per barrel WTI "is not very far from $39," and prices could drop even further before the sell-off ends.
But Eirik Waerness, chief economist for Statoil, sees a clearer horizon, with caveats: when Bloomberg asked if he thinks oil will ever return to above $60,he unhesitatingly replied, "Yes, definitely."
He conceded, "It doesn't happen tomorrow, it can take quite a while, the fact that we have so much oil in storage for so long has been a surprise, the resilience of the U.S. shale producers who actually stepped up production once prices came above $50 was a surprise, and an ongoing surprise is that we keep production stable, also outside of the U.S. and other non-OPEC countries for long.
"But at some point it has to come up: the current price level is not sustainable."
When asked how quickly the price recovery could occur, Waerness replied, "Within the next five years you should see a significant tightening of the markets for a period, with surprises up and down."
As for the question of if the Organization of the Petroleum Exporting Countries (OPEC) needs to deepen its cuts in order to help bring about a price resurgence, Waerness said, "The question there is if they deepen cuts, won't they just stimulate even more resilience and increase production?"
He added that more important to consider "is the 60 million barrels produced by other non-OPEC producers other than U.S. shale: when does that start to fall?"
What's interesting about Bauer and Waerness's analysis is that even though the latter seems far more upbeat, both seem to subscribe to the "lower for longer" mantra offered by most market experts of late.
And there are no end of disturbing numbers to justify that stance, the most recent being 111.9 million: that's the number of barrels of crude reportedly stored in tankers earlier this month, which is a 2017 high and a sure sign the market has a long road ahead before a true supply and demand balance is achieved.
