Petrobras CEO Forecasts $55-$65/bbl Oil And Says Brazil Could Be On The "Winner's Side" Of A Tough Market

RJO Futures sees oil range bound at $50-$55. File Image / Pixabay

Pedro Parente, CEO of state-owned Brazilian oil giant Petroleo Brasileiro, said on Wednesday that crude prices will remain in the $55 to $65 range over the medium term and that his country's low cost oil will help Petroleo compete in a tough market dominated by U.S. shale.

Specifically, he said Brazil is counting "on the pre salt production because the level of productivity of the fields is very high, so the cost to extract oil from the pre salt is very low," a reference to regions in the Atlantic Ocean off Brazil's coast that contains crude under thousands of feet of salt, and blocks of which Exxon Mobil, BP, Royal Dutch Shell, Total, and Statoil have been snapping up.

Parente added, "We are talking about extraction costs below $7 per barrel.

"Really, what we have to do to be on the winner's side is to work on the cost and reduce our costs."

Phillip Streible, senior commodity broker at RJO Futures, is one expert who disagrees with Parent's price forecast: he thinks oil is "trapped in this range between $55 and $50 on the downside" - and that crude will continue to sell off if the Organization of the Petroleum Exporting Countries (OPEC) doesn't extend its production cuts when the cartel meets in Vienna at the end of this month.

One thing seems increasingly clear: comments made by some observers that the recent market surge came too fast and too intensely are proving true with West Texas Intermediate and Brent on Wednesday taking another downturn (a drop of 37 and 38 cents respectively, after a nearly 2 percent decline in the previous session for WTI and a 5 percent decline for Brent since last week when it hit its highest price since mid-2015.

Earlier this month, Brazil, which produces 2.65 million barrels per day (bpd) and could be able to double its production to over 5 million bpd by 2027, refused to be persuaded by Saudi Arabia to join OPEC's production cuts; it offered no explanation other than "Brazil cannot do this."