Thursday, October 12, 2017

"Say Goodbye to $30 Oil as Supply Glut Is Mostly Gone, Says Platts"

OPEC might be closer to working off a supply glut than it thinks, says Gary Ross, head of global oil analytics at S&P Global Platts.

Brent crude, the global benchmark, is likely to top its 2017 high of $59.02 a barrel before the year’s end, Mr. Ross predicted speaking to reporters at a conference in New York.

“We think with the surplus stocks are mostly gone–we’re not going to see $30 oil anymore,” he said. “We’re basically in a $50 to $60 Brent world for the time being,” he said.

While he said Brent prices may rise to $60 this year, hedging by shale producers and slowing withdrawals from inventories in the first months of next year will likely limit gains.

But prices could break out of that range and trade between $70 and $80 in the next five years, Mr. Ross said. Demand is still growing and there hasn’t been enough investment in new oil projects amid languishing prices, rising U.S. shale output and worries that electric vehicles will eat into gasoline demand (something the Platts analysts don’t expect to happen for years).

“Electric vehicles and shale are the two sentiment killers– why is anyone going to invest? They’re not,” Mr. Ross said. “It sets the stage for surprises,” he added.

PIRA, an analytics and forecasting unit of S&P Global Platts, is hosting its annual client seminar in New York this week, drawing investors, executives and government leaders from around the world. While PIRA is known for frequently being bullish – Mr. Ross predicted that oil prices would top $60 in 2017 at last year’s conference, and in 2015 he predicted that oil prices would rise to $75 by this year– but it is also known for being well connected and influential. Mr. Ross spooked some traders at PIRA’s seminar in 2014 when he called for prices to fall.

Oil prices have been grinding higher in recent weeks as investors have become more confident that the efforts by major oil producers are helping to reduce a massive overhang in supply. The International Energy Agency said Thursday that “there is little doubt that leading producers have re-committed do whatever it takes to underpin the market,” and said oil supply and demand will be “roughly balanced” for most of next year....MORE