$70 Oil in 2017? | Russell T. Rudy Energy LLC
“World Oil” reports that hedge fund manager, Pierre Andurand, predicts $60 oil by year-end and $70 in 2017. While this sounds quite optimistic, and one could certainly question some of Andurand’s assumptions, it should be remembered that he predicted the 2014 price collapse.
According to Andurand, the Saudis think that low prices, and reduced capital outlays for energy projects, could cause a critical supply shortage in the long term. Rather, he thinks the Saudis want gradual price recovery which will incent investment and insure stable supplies. In my opinion, this is a stretch, as the Saudis were more than happy to watch oil plummet below $30 a barrel in an attempt to preserve market share and drive U. S. shale operators out of business. However, Andurand maintains that Saudi Arabia has had to end subsidies and increase taxes due to low prices. This has, in turn, led to domestic unrest. He contends that the desert kingdom needs a price of $65 per barrel to stop drawing down on foreign exchange reserves.
Oil prices have jumped above $50 since OPEC agreed at its September meeting to cut production, and Russia’s willingness to do so as well, has reinforced the price rally. Andurand predicts that non-OPEC production, other than the U. S., will decline by 600,000 barrels per day (bpd) this year and another 300,000 in 2017. This would add further upward pressure on prices. However, if prices exceed $60 he sees U. S. production increasing by 200,000 bpd. Andurand also sees Libya as a wildcard. Should that nation increase output significantly, it would exert downward pressure on prices.
As unlikely as an actual reduction in output by OPEC and Russia might seem, Andurand’s prediction should not be categorically dismissed. Not only did he predict the 2014 price collapse, his $1.4 billion hedge fund, Andurand Capital Management, has returned 11% this year as compared to an industry average of 2.9% according to Bloomberg.
To read the article in its entirety, please go to http://www.worldoil.com/news/2016/10/13/oil-seen-at-70-next-year-as-opec-cuts-speed-supply-slide .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
