Oil to climb ‘substantially’ higher
World oil prices will rise “substantially” in the coming months after hitting the bottom of a months-long rout several weeks ago, with a supply squeeze looming as early as this summer, according to PIRA Energy’s Gary Ross.
The “magic of price” has caused a rapid resurgence in global oil demand and triggered a surprisingly steep collapse in the number of U.S. drilling rigs that may be more difficult to reverse than many expect, Ross, a founder and executive chairman of influential consultants PIRA Energy Group, told Reuters in an interview.
“The balance is getting tighter and while we’ve accumulated quite a bit of inventory, and we may accumulate a bit more, the worst is pretty much over,” said Ross.
And Saudi Arabia’s spare production capacity has dwindled as the kingdom pumps oil at a record rate, leaving the global market facing a summer of higher demand and growing geopolitical risks with a spare supply cushion of as little as 700,000 barrels per day (bpd), or around 0.7 percent of the market.
“The world has been focused for the last six months on destroying supply,” Ross said on Monday. “Increasingly the mindset is going to change, they’ll have to start thinking about creating supply again, and that’s going to mean a lot higher prices than today. Substantially higher.”
To see a video of the interview: reut.rs/1DxWk93
PIRA, one of the first big energy consultancies to anticipate the tumble in oil prices last fall, is among others, including big commodity traders Gunvor and Vitol, in calling a bottom, despite U.S. crude stocks that have swollen to record levels more than 20 percent higher than last year.
Beyond calling the bottom, however, Ross is taking a more bullish view than some analysts who have warned of a prolonged lull or a new slump to as low as $20.
“Prices are way too low; they can’t last, especially with such small spare capacity,” he said.
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