Oil unlikely to return to $100 a barrel for years
Move would take major change in Saudi policy: Tom Kloza
Traders said goodbye to $100 oil prices a little over a year ago, and they might be staying away even longer than some expect.
West Texas Intermediate crude-oil prices won’t likely climb back to $100 a barrel this year, or next, according to Tom Kloza, global head of energy analysis at Oil Price Information Service.
‘Generally, it is difficult to make a case for $100 a barrel oil through the next few years.’
“Anything beyond the realm of the next 18 months smacks of witchcraft rather than real analysis,” he said in an email interview. “Generally, it is difficult to make a case for $100 a barrel oil through the next few years.”
Kloza sees a more realistic range between $40 and $60 a barrel for monthly WTI averages over the next 15 months.
“Anything north of $60 a barrel brings a return of drilled-but-uncompleted shale wells, and anything south of $40 a barrel probably inspires cuts in some of the larger domestic and overseas projects,” he said.
Oil prices have dropped more than 50% from their peak in the summer of 2014, pressured by a global glut of supplies and concerns about a slowdown in energy demand from China.
On Wednesday, November WTI crude CLX5, +0.76% was trading at $44.89 a barrel on the New York Mercantile Exchange, down $1.47, or 3.2%. November Brent crudeLCOX5, +0.27% on the ICE Futures exchange was at $48.22, down 86 cents, or 1.7%.
An executive from Brazil’s Petroleo Brasileiro SA PETR3, +0.48% PETR4, +2.05% has said that oil prices won’t make it back to $100 at all. “It won’t get to $100 again. If it gets to $70, we’ll be happy,” Cristina Pinho, an executive manager at Petrobras said at an event in Rio de Janeiro, according to Bloomberg News.
Billionaire Saudi businessman Prince al-Waleed bin Talal made headlines in January when he predicted oil would never again top $100 a barrel, deeming such price levels “artificial.”
Kloza argues that a $100 price for WTI is not possible without a change in Saudi Arabia’s “policy of market share, as opposed to the long-held policy of being the [Organization of the Petroleum Exporting Countries’] swing producer.”
He said a change in Saudi policy isn’t very likely, but the Saudis do “have the power to alter the calculus that has prevailed for crude-oil prices since after the OPEC meeting last November.”
Meanwhile, a slide in emerging-market growth, particularly in China, would change the “variable of rising demand,” he said. And “weakness in the spot prices for gasoline and diesel and heating oil could tug crude-oil prices lower in the fourth quarter.”
Looking much further forward, Kloza was optimistic that higher oil prices are on tap in the next decade.
“Investment banks project that light duty vehicle counts in India and China will advance to around 250 million versus about 50 million in 2008,” he said.
Source: marketwatch – Oil unlikely to return to $100 a barrel for years
