Pre Freeze Talk Weeks Will See Turbulent Oil Market And 10 Percent Swings: Analyst

The roller coaster oil market plunged downward again on Monday, dropping nearly 2 percent after two consecutive days of gains, with Brent settling at $49.26 (down 0.66 cents) and West Texas Intermediary settling at $46.98, down 64 cents.

While a much stronger U.S. dollar was cited as the cause for the losses, Bob Iaccino, co-founder of Path Trading Partners, told Bloomberg television that so many countries either ramping up production or trying to make up for lost output will be one reason for a bumpy market going into the Organization of the Petroleum Exporting Countries' freeze talks in late September.

He said, "It's going to be a bumpy ride these next four weeks while we wait for that meeting, and I don't think anything's going to happen at that meeting."

Iaccino went on to point out that with the national average of gasoline at $2.20 and impending falling demand, "We're looking at $45 on the downside as being the support that I honestly think won't hold."

Alluding to a trading range that occurred in June of 10 percent, he added, "I think that's what's going to happen here": trading back and forth between $45 and $50 "with no real direction."

Ryan Lance, chief executive officer for ConocoPhillips, also thinks the market is in for a rough ride - but for longer than four weeks: "The volatility is here to stay," he said, adding that market rebalancing "will extend into 2017; the inventory levels are still quite high."

To which Scott Sheffield, CEO of Pioneer Natural Resources Co., remarked, "The question is, how long do we stay in a $45 to $50 oil-price scenario?"

"I think 2017 could be another tough year; I'm a firm believer that in 2018 it could turn around."

But for every realist there's an eternal optimist, and Lukas Lundin, director of Lundin Petroleum, is confident that crude could return to $100 because the two-year market downturn has curbed investment.

Speaking with The Financial Post, he confessed that this magnitude of rebound won't be good for industry and that "I think between $50 and $80 is probably better for our business: it keeps it more stable and all the good projects would work." 

As far out as Lundin's crystal ball gazing may seem, it's hardly without precedent: in June, Robert Johnston, CEO of the Eurasia Group, argued that given the continued rise in global energy demand $100-plus oil is possible;