$60-a-barrel in sight as April contract starts trading, analysts says.
By Sara Sjolin
February 21, 2017
Oil prices may soon head upward, breaking out of the tight range in which they’ve traded lately, a top energy analyst said Monday.
Speaking at the S&P Platts London Oil & Energy Forum on Monday, PIRA Energy’s Gary Ross said the bull market for oil is about to return, potentially sending prices as high as $60 a barrel in the coming weeks.
“We think the markets have consolidated enough and that the next, smaller leg in the bull market is about to occur,” said Ross. “We are actually quite [upbeat] on prices, particularly when the April contract becomes the front-runner later this week.” (The “front-runner” is the nearest tradable contract.)
The April contract for West Texas Intermediate crude oil CLJ7, +0.84% recently trading around $54, becomes the front-runner on Tuesday. Brent LCOJ7, +0.75% is already trading with deliveries for that month and was recently around $56.
“There’s a lot of things coming together in April that make us believe that we can very well see the next, shorter, leg of the bull market soon,” Ross said. “I say shorter, because [the upward move] is unlikely to be $10-$15 a barrel, but more like $5 a barrel.”
Ross expects a big drawdown in U.S. inventories as the production cuts from the Organization of the Petroleum Exporting Countries start to be felt in the market. He also noted that so-called “pipeline fill,” the oil you need in pipelines to allow the facility to operate, is likely to reduce supply at the Cushing, Okla., storage and trading hub as spring nears.
Ross is frequently bullish on oil prices. In 2015, for example, he forecast that oil could jump to $75 in 2016. Prices did almost exactly the opposite, hitting multiyear lows in February 2016, before ending the year on a more upbeat note following OPEC’s output deal.
At the forum in London, however, Ross’s relatively upbeat projection was backed by S&P Platts. In his introductory comments, Dave Ernsberger, global head of energy pricing at Platts, said Platts Analytics projected Brent could rise to $65-$70 a barrel by December this year.
“The turnaround in prices was driven by the landmark agreement between OPEC and non-OPEC countries to cut production which has provided a floor under oil prices with U.S. shale production providing a ceiling,” Ernsberger said.
Conference delegates had a more muted outlook on the oil price, however. In a poll asking “what price will front-month ICE Brent futures be trading this time next year,” 48% of respondents chose the $55-$65 bracket.
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