Freeze Predicted | Russell T. Rudy Energy LLC
“World Oil” reports that Gary Ross, with PIRA Energy Group, predicts that OPEC will agree to a production freeze. He contends that failing to do so would risk the cartel becoming irrelevant. While it would be easy to dismiss Ross’ forecast as overly optimistic, it should be remembered that he is one of the analyst who predicted the oil price collapse of 2014.
Should OPEC affect an agreement to freeze or cut production, Ross thinks Russia would go along and drive oil to $60 in short order. Alternatively, failure to reach such an agreement would result in prices falling to $35. An OPEC production cut would be the first time in eight years that it has agreed to do so. Unlikely as such an arrangement might seem, Ross feels that sheer self-interest will prevail. He reasons that “OPEC has to reach a deal to become relevant again. Our view is that they will cut and I think when push comes to shove they will collectively agree on November 30.”
Saudi Arabia has drawn down its currency reserves in an effort to offset the impact of low crude prices. Nigeria’s credit has been significantly compromised, and Venezuelan president Nicolas Maduro is facing demands for a recall election. Meanwhile, the International Energy Agency predicts that without significant OPEC production cuts, prices will deteriorate amid relentless supply growth.
Alternatively, Ross sees a supply reduction of 500,000 barrels of oil per day (bopd) in the first half of 2017. “This would accelerate the rebalancing of markets, accelerate the reduction in global surplus stocks and could even eliminate most of the surplus stocks by the beginning of the second half of the year.” Concurrently, he sees global demand growth at 1.9 million bopd this year and an additional 1.6 million bopd in 2017, based on economic growth in China and India.
While we might not all agree with Ross’s forecasts, we can all hope that he is right this time as well.
To read the article in its entirety, please go to http://www.worldoil.com/news/2016/11/14/analyst-who-foresaw-oil-crash-sees-opec-uniting-in-self-interest .
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