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....
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