Oil Will Likely Hit the $60s this Year - But Not Before More Short-Term Pain: Analysts

by Ship & Bunker News Team
Wednesday March 29, 2017

Barclays this week bucked conventional analytical wisdom by stating that the steady fall in oil prices is fleeting and even rampant U.S. production won't ruin a market that is essentially balanced.

Michael Cohen, head of energy commodities research at Barclays, told Bloomberg television he thinks the price doldrums are  "a short-term blip" due to positioning being stretched and to sour sentiments over the Organization of the Petroleum Exporting Countries' (OPEC) failure to bring about real gains with its oil reduction strategy.

He said, "We think prices will eventually start to rebound; the next two to three weeks are going to be weak" due to this time of year tending to be a weak period for oil overall, "and as we move further into the April and May time frame, refineries are going to start to ramp up again [and] crude demands should start to pick up."

Cohen then made a statement that would presumably cause vigorous rebuttal from others in the analytical community: "the most important thing to take into account is that from last year until this year, last year we were seeing a period of time when supply was in excess of demand, and now supply and demand are basically balanced."

He added that the balance has been achieved even factoring in the steady upsurge of U.S. shale output.

Mark Yusko, CEO and CIO of Morgan Creek Capital Management, is similarly enthused about how the market will develop in coming months, with the caveat that prices will get worse before they get better.

Speaking on CNBC's Trading Nation, Yusko, who is famous for calling a 40 percent decline in oil two years ago, said crude will likely "drift from the low $40s up toward $60 by the end of the year.

"I think it'll be pretty flatish in the $50s during the summer, and then we'll get that last December rally into year-end like we got last year, and probably finish in the high $50s, maybe hit $60."

Yusko explained the upcoming rut by stating, "I think there are a lot of oil bulls out there, particularly at the beginning of the year."

If nothing else, Cohen and Yusko bring a welcome note of optimism to analytical forecasts that of late have become notably pessimistic and hinge around the question of whether or not OPEC will extend its reduction strategy: a typical prognostication was recently offered by Gene Marcial, manager market research at Tradition Energy, who warned that "Without the production cut agreement, I think you could basically target the low-to-mid $30s."