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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…

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Statoil Economist Predicts $60 Oil “Relatively Soon”

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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  • JHM on June 26 2017 said:
    '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. ... “At some point this level is not sustainable,” the economist added.'

    What's not sustainable? Oil could remain under $60 for the next ten years while production declines. This is what peak demand looks like. The price never gets high enough, long enough to bring supply back to where it once was.
  • zorro6204 on June 27 2017 said:
    Relatively soon, on a 2050 time scale? Yeah I suppose, heck, even at 2% inflation will get you there eventually. But if $50 was enough to flush out the rigs, and that started happening in the $40's by the way, then why should the next price rally be any different than the last? Boom and bust, but it seems to me $50 is the new $100.
  • Justin on June 27 2017 said:
    Yes a 1.5 mm/bbl a day increase in consumption in 2017 is what peak demand looks like...
  • Timmie Tee on June 27 2017 said:
    Eventually the price always settles at the intersection of the marginal cost and marginal revenue curves-- we are below that point now, where producers will fall out until supply decreases. I think that equilibrium point is about $60/bbl. Prices will eventually exceed that point when deep well reserves decline below upstream discoveries.

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