Americas News
Crude Ends the Week Soft As Bloomberg Pushes Notion of $80 Oil Being Sustainable
The U.S. reporting 200,000 new jobs caused the dollar to rise on Friday and a corresponding drop in crude prices, with West Texas Intermediate falling a modest 35 cents to $65.45 per barrel and Brent falling more severely by $1.19 to $68.46 per barrel.
Abhishek Kumar, senior energy analyst at Interfax Energys Global Gas Analytics, agreed that "Oil prices have come under pressure because of rising oil production in the U.S., together with a marginal rebound in the U.S. dollar index."
However, he added, "The price is currently in overbought territory, which has also promoted profit taking."
The notion that rising crude prices are akin to a bubble ready to burst was a major concern for analysts and duly reported by media as late as Thursday; but Bloomberg on Friday went to considerable lengths to argue that the big banks have accepted the Organization of the Petroleum Exporting Countries' (OPEC) production cutbacks are working, and that persistent analytical warnings to the contrary were completely wrong.
In a story that summarized earlier outlooks of Goldman Sachs Group Inc., Morgan Stanley, and JPMorgan Chase & Co., Bloomberg noted that the banks claimed OPEC wouldn't reach a deal to begin with (which given the cartel's past record was a fair assumption to make); that OPEC would fail to deliver on its cuts (which is still a matter of debate, the current 129 percent compliance due to involuntary downturns notwithstanding); that the cuts wouldn't clear the glut (which to date is still the case, at least not completely); and that U.S. shale will keep a lid on prices (which, given the argument that the current market is falsely inflated, may still be a possibility).
Bloomberg television continued the theme of OPEC living up to its promises and creating a massive crude price upswing (which, ironically, was a cause of media concern up until recently) by hosting Oswald Clint, senior research analyst at Sanford C. Bernstein, who agreed the big banks are embracing the concept of crude prices near $80: "It's incrementally rising...because demand is robust, supply is not coming through because we're not investing - investments have fallen to all time lows - and ultimately OPEC are being extremely disciplined....so I think it's a real price increase that actually is sustainable."
He conceded that he "potentially" might be underestimating the capability of U.S. shale producers to satisfy global demand to the degree that $80 oil might not happen; however, "we expect a lot of growth this year but don't find it disruptive to the overall oil price for 2018.
"I think we're expecting a lot of growth comparable to last year, but still the price should remain stable and start to grind high later in the year."
Earlier this week, Tom Kloza, global head of energy analysis at the Oil Price Information Service, reiterated the apparently now-unpopular notion that crude has entered a danger zone due to "the tremendous speculative bubble" and warned that "all of the demand growth - all of it - is overseas; it's not in the United States....my sense is that global markets give back some of these very, very robust financial gains."
