Asia/Pacific News
Production Disruptions and Demand Growth Will Lead To A "Fundamental Price Recovery": Gammel
Oil may have fallen $1 per barrel in early trade Monday, but Jason Gammel, senior analyst for Jeffries, told CNBC that the Canadian wildfires coupled with production disruptions in other parts of the world plus demand growth is setting the stage for a "fundamental" price recovery.
Gammel stated, "I think with continued demand growth over the course of this year and continued declines in non-OPEC supply that we are already seeing in places like the United States, the market actually comes into much better balance by the end of the third quarter and that's the stage for fundamental price recovery."
He went on to note that "In the case of China, what is encouraging is that their imports are still very high, because I really think that, from a supply-and-demand standpoint, you need to have strong Chinese demand growth in order for the market to become more balanced by the end of the year."
Gammel agreed with many critics' concerns that a price recovery would reinvigorate U.S. shale production, which they fear would cause the Middle East to take retaliatory production action - but he said the renewed production wouldn't offset the overall lower American output.
Gammel is nothing if not controversial: in March of 2015 he told Bloomberg television's The Pulse that $100 oil was possible in a couple of years.
Crude started the week soft, with analysts saying this was in response to Iran stating that it will continue to ramp up production and has no intention of agreeing to any multi-nation production freeze.
Jim Ritterbusch, president of Ritterbusch & Associates, said, "Upward price momentum appears to be slowing as we feel that this late winter/spring bull move is in a very advanced stage with only about $3 to $4 a barrel remaining on the upside in referencing either WTI or Brent futures."
Contrary to Gammel's worldview, John Kilduff warned last week that the world is still oversupplied by 1.5 million barrels per day, and does not see that the market will rebalance soon.
