EMEA News
Saudi Shake Up "Terribly Detrimental" to Long Term Market Prospects: Gartman
This week's mass arrest of dignitaries and royalty in Saudi Arabia caused a brief market surge, but so-called "commodities king" Dennis Gartman believes it signals a monumental shift that could cause West Texas Intermediate to plummet back to historically low levels.
The editor of the Gartman Letter told CNBC that "You may get another dollar or two upfront in the front months just because of the confusion, but in the long run this is terribly detrimental to crude oil prices."
Gartman argued that as countries become less reliant on fossil fuels and production technology improves in the U.S., the Saudis' grip on the oil industry is slipping: "Is Saudi Arabia losing its position of authority? Absolutely: the game has changed dramatically."
If the overall message is that the market could become increasingly volatile, one U.S. firm - one that has pummeled the competition of late in terms of performance - is well prepared for what lies ahead.
Ryan Lance, chairman and chief executive officer of ConocoPhillips, told Bloomberg television that with $50 oil over the next three years his firm "would generate $4.5 billion in incremental cash, and at $50 or $60 we'll just generate more incremental cash."
But he added, "One worry we have is if we see $65-$70 oil: will we see another cycle come back into the business as the U.S. unconventional starts to grow again, as the Middle East starts to produce more oil after they go through their reductions; we're concerned about that volatility, and we'll hold some cash to be able to manage through that."
ConocoPhillips sold more than $16 billion in low-margin assets last year in a bid to make the company more resilient and is readying itself to make profits even if oil prices dip to $40.
Analysts overall think that the events in Saudi Arabia could lead to a strong decline in prices in the long term after a short term push up: earlier this week, Roberto Friedlander, head of energy trading at Seaport Global Securities, suggested that prices could rise as high as $70 per barrel, although he went on to state that they will later drop to $50.
