Crude Pundits Gloomy in Wake of Friday's Soft Market Performance and Possible Woes Ahead

A consultant says U.S. shale's days are numbered. File Image / Pixabay

Another unsurprising performance for crude unfolded Friday in the wake of the U.S. pulling out of the Iran nuclear deal and Britain, France, and Germany vowing to support it regardless: West Texas Intermediate settled down 66 cents to $70.70 per barrel, while Brent settled down 35 cents to $77.12.

John Kilduff, founding partner at Again Capital, summarized the familiar motivations of traders by saying, "It's the same witches brew of bullish stuff: Iran, Venezuela, the lack of alacrity by Saudi Arabia to bring more oil onto the market" to compensate for the expected drop in Iranian crude exports in the next few months.

Even though a bird's eye view of the geopolitics on display this week suggest that the reinstatement of sanctions against Iran will have much less impact than some dramatically-inclined analysts think and that export shortfalls will likely be compensated by the Saudis or other Organization of the Petroleum Exporting Countries (OPEC) members relaxing their output restrictions, pundits were nonetheless concerned about a host of emerging dynamics.

With regards to the broader crude market rally this week, Jeff Carbone, managing partner at Cornerstone Wealth, told CNBC television that it was a tug of war between the positives and negatives of global concerns, interest rates, and other elements, and that markets should continue to rise for the rest of 2918.

Carbone's remarks inspired CNBC co-panelist and contributor Ron Insana - who worries that oil could climb to as high as $100 per barrel this year due to geopolitical tensions - to remark that said tensions are "a risk I don't think is fully discounted by the markets yet."

Despite the prospect of OPEC stepping in to take up the slack caused by Iran, U.S. investment bank Jeffries stated in a note, "Even if physical supply is held constant ... the market will still be faced with a precariously low level of spare capacity."

Presumably, pundits should have taken solace in the latest Baker Hughes data showing that U.S. drillers added rigs for the sixth straight week, bringing the total rig count to 844 - the highest since March 2015.

However, in keeping with the somber tone of analytical outlook, media published the ruminations of Arthur Berman, a former Amoco scientist who now works as an industry consultant, and who believes that neither the Permian region of Texas and New Mexico that currently pumps more oil than any other North American field, nor the Eagle Ford sales field several hundred miles away, will last  for long.

He said to delegates at the Texas Energy Council's annual gathering in Dallas, "The best years are behind us; the growth is done," and he advised, "Conserve what you've got, learn to live with less, open your eyes and enjoy the rest of your day."

It's worth noting that Berman created a furor in 2009 by claiming that shale gas was mostly hype, and Bloomberg noted that s incendiary remarks in Dallas, he hasn't sold the stock of shale driller EOG Resources Inc. that he inherited from his deceased father.

About the only organization that seemed unfazed by neither crude prices nor the potential impact of world events this week was OPEC itself, with three unnamed sources telling media that the cartel is in no rush to react to the Iran situation and that the best thing to do is monitor events as they unfold.