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Andurand Says $300/bbl oil Within a Few Years "Not Impossible"
Analysts loosely agree that healthy demand and self-discipline on the part of Organization of the Petroleum Exporting Countries (OPEC) members restricting their output will likely power the crude rally throughout this year; however, in terms of pure forecasting audacity, nobody can top Pierre Andurand, founder of Andurand Capital Management: over the weekend he stated that $300 per barrel oil is a possibility within a few years.
In a series of tweets, Andurand noted that concern about the impact of electric vehicles on future demand was limiting investment in projects with long lead times: "So paradoxically these peak demand fears might bring the largest supply shock ever.
"If oil prices do not rise fast enough, $300 oil in a few years is not impossible."
Andurand also bucked common wisdom that triple-digit oil prices will negatively impact demand growth: "No, $100 oil will not kill the economy, and we need $100-plus oil to encourage enough investments outside of the U.S."
A far more conservative outlook, albeit for the short-term, was provided by the most recent Reuters poll, whose 38 economists and analysts polled forecast that Brent would average $67.40 this year, over 5 percent higher than the $63.97 projected in the previous month's poll.
Rahul Prithiani, director at CRISIL Research, remarked that "Strong compliance (with OPEC production cuts) is expected at an overall level during the year ... global GDP growth is expected to rise to 3.9 percent this year and in 2019.
"As a result, oil demand growth is also expected to remain robust over the next two years."
Of course, the elephant in the room remains U.S. shale, and the Energy Information Administration on Monday reported that Texas oil production jumped to 4.01 million barrels per day (bpd) in February, almost 21 percent higher than 2017, the highest in EIA data since 1981; that pushed total U.S. crude output in February up 2.6 percent to a fresh record of 10.3 million bpd.
Elisabeth Murphy, an analyst with ESAI Energy LLC, said, "Growth in U.S. oil production is driven by Texas and the Permian Basin; it's really booming."
However, the overall view from experts is that dramatically declining output from countries such as Venezuela (which contributed to OPEC only pumping 32.12 million bpd this month, down 70,000 bpd from March, according to Reuters), along with geopolitical tension leading to further production interruptions elsewhere, will absorb the increase in U.S. supply.
Hannes Loacker, an analyst with Raiffeisen Capital Management, said with regards to the possibility of the U.S. reimposing sanctions against Iran, "While we assume that part of the risk is already priced in, we nevertheless believe that a termination of the deal would lead to an immediate increase of the oil price by $2-3 per barrel.
"It cannot be ruled out that the Brent price will even temporarily peak above the $80 mark."
Unfortunately, rising prices aren't beneficial for everyone: Deutsche Bank AG in Mumbai last week suggested that higher crude prices are a net negative for the Indian economy in almost all aspects and that $78 oil could increase inflation by 30 basis points.
