Oil Heading for $60

The UAE’s economy minister sees oil jumping to $60 per barrel in the next few months.

"It’s possible for oil prices to reach $60 or more during this summer,” UAE economy minister Sultan Bin Saeed Al Mansoori said at a conference in Abu Dhabi on May 30.

There is a growing chorus of oil market watchers that see the oil price rally continuing, after rallying more than 80 percent over the past several months. According to Bloomberg, the global chief economist at Standard Chartered Plc says WTI and Brent will rise above $60 before the end of the year, and SEB Bank agreed that the markets would see oil prices above $60 in 2016. Related: The Crude Crash Has Created Oil’s Technological Superpowers

Those voices come two weeks after investment bank Goldman Sachs, a notorious bear when it comes to oil prices, suddenly become a lot more bullish on crude. "The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected," Goldman concluded earlier this month. That statement came not too long after Goldman had warned that record high oil storage levels around the world threatened to push crude prices down into the $20s again.

Now, sentiment is trending up along with prices. Global demand continues to rise, and summer driving season in the U.S. could add a bit more strength on the demand side. The IEA has already predicted that the global surplus shrinks to just 0.2 million barrels per day in the second half of the year, but as the surprise outages in Canada and Nigeria make clear, unexpected events could tighten markets further.

Still, the markets are not without headwinds. Suncor Energy is bringing some oil production back online in Alberta this week as the threat of wildfires recedes. Also, Iraq raised its export quota ahead of the OPEC meeting, signaling its intent to step up exports. Related: 3 Years Of Painful Cuts Sets Markets Up For Serious Supply Crunch

Nevertheless, global demand continues to rise while producers face disruptions and natural depletion. That points to higher oil prices.

"I think the secular trend is higher. We have been saying this for a few months. The damage we are doing to the non-OPEC supplies is just tremendous at this point in time. Non-OPEC supplies are down about 1 million barrels per day…So yes, we can get a bit of a correction in the near-term. Net-length is very high in the market. But the secular trend is definitely up," Amrita Sen, cofounder and chief oil analyst at Energy Aspects, told CNBC in a May 27 interview.

By Charles Kennedy of Oilprice.com

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