Oil Deal Extension Could Lead to Higher Prices and "Super Bull" Run: Analysts

Some are troubled that OPEC has not publicly discussed an exit strategy for when its cutbacks expire.

Forget Thursday's crude losses of almost 5 percent due to the Organization of the Petroleum Exporting Countries (OPEC) agreeing to extend but not deepen its production cuts, says Prestige Economics: higher prices lie ahead as well as a bullish market overall.

Writing in BloombergView, Jason Schenker, founder and president of Prestige, bases his optimism on the "strong monitoring and compliance" during the first six months of the OPEC initiative, as well as the upcoming U.S. driving season (which he predicts will be the biggest in history in terms of gasoline demand), plus global oil demand growth, with "modest improvements" for China that "should support average oil prices over the next two years."

Schenker's remarks about China seem to clash with an opinion he voiced to CNBC earlier this week: he said, "If you wanted to know where the downside risk is, it is not in OPEC's decision or in U.S. driving demand or in global inventories rebalancing, I think China is the big source of concern.

"If China weakens further, that poses downside risk, but if we see the rebound in the (China Caixin Manufacturing Purchasing Managers Index) and we see Chinese manufacturing PMI as a proxy for global growth improve, then we see some upside potential here."

While skeptics may argue that compliance did little to counter rampant production from rogue OPEC members for the first six months of the cutback agreement and that it's problematic that modest Chinese growth demand will compensate for the huge gains continuing to be made by U.S. shale, Schenker is hardly alone in his upbeat analysis.

Alan Bannister, regional director of oil content at S&P Global Platts, told CNBC that all conventional wells will deplete by 10 percent over the next three years, and because of that as well as reduced exploration "it does sow the seeds for a potential super bull run" that could be "well in excess " of $80.

Still, the dismal May 25 trading day sees no end of analysts troubled by the short and long term impact of OPEC's strategy, case in point: Ebele Kemery, head of energy investing at JPMorgan, who told Bloomberg television she is concerned by lack of any talk at the OPEC summit of an exit strategy - widely viewed as necessary to facilitate a smooth market transition once the extended cuts expire: "It's not too early to start telling the market and communicating what they're going to do.

"They're talking about price stability: to get to price stability, we need to know what the end game is."

Prior to the extension being formally announced, Edward Bell, commodities analyst at Emirates NBD, argued that an extension without deeper cuts will not be "enough to have a big impact in terms of supporting prices much beyond where we're at now."

He added that while OPEC can control inventories to a degree, in terms of influencing all-important demand, "they have very little control over that."