An Expert's View on Oil Prices

By: Greg Gill / June 3, 2016

Yesterday at the OPEC meeting, a number of members were hopeful that they would successfully reintroduce the idea of putting limits on oil production.  Iranian oil minister Bijan Zanganeh was quick to shut down any hopes of this happening. Luckily for Zanganeh and Iran, no one at OPEC took any real action, as far as slowing production goes.

It is no secret that Iran did not want to slow production, especially since they are trying to make an economic comeback now that sanctions are over. Who can blame them? When a particular country and its number one industry is experiencing historically slim margins, why would it consider slowing down what is keeping its economy alive? 

One might argue that Iran should want to slow production to help raise the price floor. In an easily predictable marketplace, this might make sense to do, but as we know there is no such thing in today’s world.  Sure, in a perfect world, Iran could slow  production in hopes of prices raising, but it cannot afford to wait around for hypotheticals. Even though Iran would much rather have crude closer to $60 rather than the $30-$40 range, it is unlikely that they would allow the Saudis to become the sole powerhouse in the Middle East.

So, where do we go from here?  Ben Brockwell, OPIS director of data, information and pricing shared some thoughts in a recent keynote speech entitled “Oil Prices: What Just Happened and More Importantly, What Happens Next?”

Some highlights from his speech:

  • Oil prices not likely to move much higher than $45 -$50 for the rest of 2016. Would take a global event to push oil to $60 or $70 in 2016.
  • Even if crude achieves supply/demand balance, refined productgs will continue to be a problem, since supply is growing faster than demand
  • As prices recover, U.S. crude production will not increase as quickly as some think for two reasons:
    • Many O&G workers have been laid off and it will take time to rebuild workforces
    • Banks may be wary of lending money to producers who lost the money previously lent to them
 As of 12:56 PM, Heating Oil is down .0149, RBOB down .0246 and WTI Crude is down .3600.pens.png

Categories: Daily Market Update


Greg Gill

Written by

Greg Gill

I’m passionate about fully understanding my customers’ fuel operations and the fuel markets in which they operate. I want them to view me as their fuel expert. To develop strong, trusting partnerships with customers, I have to provide them with meaningful and timely information to ease the challenges of making smart fuel decisions, allowing them to focus on their core business.


Guttman Energy Daily Market Update Disclaimer – The information contained in this market update is derived from sources believed to be reliable; however this update could include technical inaccuracies or typographical errors and Guttman Energy does not guarantee the accuracy, completeness or reliability of this update. FURTHERMORE, THIS UPDATE IS PROVIDED "AS IS," WHERE IS, WITH ALL FAULTS AND WITHOUT ANY WARRANTY OR CONDITION OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY. GUTTMAN ENERGY ALSO SPECIFICALLY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES. YOU USE THIS UPDATE AT YOUR SOLE RISK. This update and any view or comment expressed herein are provided for informational purposes only and should not be interpreted in any way as recommendation or inducement to buy or sell products, commodity futures or options contracts.


Comments

Subscribe to our blog

Price Feed

Stay up-to-date on current fuel prices and market trends with our NYMEX price feed (15 minute delay to the live market).

© 2018 Market data provided and hosted by Barchart Market Data Solutions. Fundamental company data provided by Morningstar and Zacks Investment Research. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer.

Categories

Contact Us