Oil Slips, But $60/bbl is "One Supply Disruption in Venezuela Away"

by Ship & Bunker News Team
Friday June 10, 2016

Although a three-day price rally for oil ended on Thursday with a close of $51.95 per barrel for Brent and $50.56 per barrel for West Texas Intermediate (WTI), analysts with a sharp eye on the charts insist that oil could rapidly exceed the $60 level.

John Kilduff of Again Capital, told CNBC that his chart shows an "inverse head and shoulders" pattern and a straight ascension to where WTI could reach $62, a level not seen since last summer.

Based on current trends, Ship & Bunker data indicates this would push IFO380 bunkers in the primary ports over $300 per metric tonne (pmt), compared to Ship & Bunker's Global 20 Ports Average Thursday which indicated an average price of $251 pmt.

Kilduff said, "The chart looks like a million bucks: the chart would say: 'stay long in this thing for another $10'"; however, he also warned that prices will likely decline after the peak summer demand is over, possibly to $30.

Echoing this opinion is Gene McGillian, broker and analyst at Tradition Analytics: "If you look at the channel from $26 up to $50, you would think the fundamental picture has changed significantly; the fact is, technicals can drive the market for a while, but sooner or later the fundamentals are going to give you your price direction."

McGillian cites global oversupply as the persistent risk to prices, along with a possible U.S. interest rate hike that would strengthen the dollar and hurt crude prices.

Still, $60 oil for the near future remains at the forefront of analytical thought, summarized by Andrew Lipow, president of Lipow Oil Associates: "As I look out to January 2017, I'm thinking of upping my forecast to $55 a barrel and I think we're just one supply disruption in Venezuela away from hearing about $60 oil because that political environment is very unstable."

The dynamic price landscape may prove to be good news for Russia, whose majority state-owned oil giant Rosneft this week reported a first-quarter net profit of 14 billion rubles ($216.8 million) – a 75 percent drop year-on-year.

Russia has proposed income-generating strategies to bolster its coffers, but Chris Weafer, a senior partner at Macro-Advisory, told CNBC that the urgency to impose those strategies has subsided due to the higher oil prices, along with continued ruble weakness, and a potential Rosneft stake buy-out.

Earlier this year, Raymond James predicted that oil prices will climb to $60 per barrel due to non Organization of the Petroleum Exporting Countries member countries adapting to lower prices by severely under-investing – which in turn will rebalance the market.