Oil prices will jump over $60 “relatively soon,” according to Statoil chief economist Eirik Waerness, who spoke to Bloomberg on Monday.
According to Waerness, $60 barrel is unlikely to happen as soon as tomorrow, but the goal will be met sooner, rather than later, on a 2050 timeline. A series of “surprises” have affected the recovery of oil prices over the past three years, causing previous forecasts to be inaccurate.
“The fact that we have so much oil in storage for so long has been a surprise,” Waerness said. “The resilience of U.S. shale oil producers to actually step up production once prices came above $50 is a surprise. An ongoing surprise is that we keep production stable outside of the OPEC and non-US countries for so long.”
He said oil prices should tighten with the next five years, describing the slow recovery as a “patience game.” Non-OPEC nations must also cut production in order to reverse the supply glut.
“At some point this level is not sustainable,” the economist added.
The Organization of Petroleum Exporting Countries (OPEC) agreed to cut output by 1.2 million barrels per day in November as part of an effort to reduce the crude supply glut. Oil prices initially rose above $50 when the reduction began in January, but have become bearish in recent weeks as Libya, Nigeria, the United States and other producers continue to increase output. Related: Saudi Reshuffle Could Completely Shake Up Oil Markets
Brent crude slipped below $45 on Wednesday, reaching its lowest price since last November, according to Bloomberg last week.
“There’s a sea of negativity,” Maxwell Gold of ETF Securities LLC said. “This is much more a story of sentiment weighing on the markets.”
The U.S. Energy Information Administration reported a 2.5-million-barrel draw on domestic inventories on Wednesday, but the news was not enough to boost West Texas Intermediate (WTI) prices, which have fallen 22 percent from a peak in January.
By Zainab Calcuttawala for Oilprice.com
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