Crude at $80/bbl Probable, But $55-60/bbl is the Sweet Spot: Analysts

by Ship & Bunker News Team
Tuesday May 29, 2018

Although talk persists in crude analytical circles of oil soon hitting $100 per barrel due to various geopolitical factors - first and foremost being collapsing production in Venezuela - two experts on Tuesday speculated about where prices should be compared to where they will go - and in either case, the range is well below the triple digits.

Jerry Bailey, president of Petroteq Energy Inc. and former president of Exxon Arabian Gulf, told CNBC that while he was surprised by the magnitude of the recent crude price drops, he is confident the market will "swing back around" from what he describes as merely "a short term reaction."

He went on to forecast that "We'll see $80 as a reasonable target; I think we're going to stay in this $70 to $80 range, but there's so many political things happening all at once right now [and] I think Venezuela's about to collapse, and that's going to put oil back."

Bailey added that unrest in Libya, India, and even Italy could affect market conditions in the near term, but he tended to downplay the potential fallout over the U.S. reimposing sanctions against Iran, noting that Saudi Arabian production can "backfill" the losses caused by lack of Iranian exports.

Meanwhile, Robert Phillips, CEO of Crestwood Equity Partners, suggested that the sweet spot for oil is even lower, in the $55-$65 range.

He told CNBC, "That's more than sufficient to drive supply development in the areas we operate, but not too high that it destroys demand as well."

Like Bailey, Phillips suggested that the market is currently in a fairly healthy place and that the sweet spot is occurring right now, even with regards to problems with take away capacity in oil rich areas of the U.S. such as the Permian Basin (he stressed that infrastructure is rapidly being installed to handle the situation): "Honestly, the markets are fairly balanced right now, both globally as well in the U.S., and we think it's in a good spot for the industry."

Earlier this month, the Swiss bank UBS determined that the global sweet spot for crude - where oil prices may have positively contributed to global growth - "seems to be somewhere between $50 and $70 per barrel."