Yesterday concluded International Petroleum Week in London and the theme of the week was anything but “optimism.” Ian Taylor, CEO of Vitol Group, argued that prices will stay low for up to a decade due to slowed economic growth in China and expectations that suffering U.S. shale producers will increase production as soon as prices recover. Others were feeling similarly pessimistic, with one participant joking that the surplus of inventory will soon have people filling their swimming pools with crude. Goldman Sachs’ Jeff Currie stated that he “wouldn’t be surprised if this market goes into the teens.” It wasn’t long ago that WTI was in the forties and Goldman Sachs was raising eyebrows with predictions of $20/bbl. What once seemed impossible is now approaching reality, so is it really unthinkable that prices could reach the teens?
OPEC continues to talk about production cuts, but while we have yet to see any actual cuts, the speculation continues to move the market. The United Arab Emirates Oil Minister said yesterday that producers are ready to make cuts and suppliers won’t make cuts until there is total collaboration. This caused oil to rebound from its lowest level in over 12 years. The technical and mental challenges associated with the 12 year low make the cuts more likely. It appears this is not hitting deaf ears as the market rallied as soon as the latest OPEC talk hit the news. This morning WTI traded at $29.28, up $3.07 from last nights $26.21 close. Gasoline and Diesel are also up $0.0817 to $1.0233 and $0.0850 to 1.0641, respectively.