Optomism Persists | Russell T. Rudy Energy LLC
Oil analysts, like most of us in the industry, are optimists as documented in a recent article in “Rigzone”. This was true even back in June of last year when oil was over $100 per barrel and no one foresaw the price collapse. This optimism persists even today as oil prices dipped to $41.94 at one point last week, the lowest level in more than six years, and analysts were still looking for a recovery by year-end.
Goldman Sachs seems the exception to the rule. Last May when it appeared that prices might rally, the investment banking firm predicted that the upswing would fizzle, and it did. Investment firm Morgan Stanley was upbeat until July when they revised their price call and advised investors that we could be facing the worst oil price rout since 1986.
One thing that makes predicting oil prices so difficult is the large number of moving parts involved on both the supply and demand sides of the equation. Previously, OPEC controlled a large portion of the world supply and played a key role in determining prices. Now with North American oil shale and oil sands projects emerging as major factors, the task of prognosticators has become much more difficult.
At least everyone agrees that prices have collapsed, and most feel that they have reached the bottom or are near it. Even so, there is no consensus as to whether we will see a “U” shaped (prolonged period of low prices) or “V” shaped (shorter period of depressed prices) recovery.
Alternatively, John Castellano at AlixPartners foresees a “shark teeth” future for oil prices for the short to intermediate term. He predicts volatile trading within the $45-65 per barrel range.
Realistically no one really knows. All we can do is monitor key indicators and draw our own conclusions.
To read the article in its entirety, please go to http://www.rigzone.com/news/article.asp?hpf=1&a_id=140116&utm .
