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Page added on October 28, 2015

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Pouring oil on troubled waters: ‘Surplus until 2017’

Pouring oil on troubled waters: ‘Surplus until 2017’ thumbnail

Thomas Pugh economist at Capital Economics predicts oil could hit $55 per barrel for Brent crude at the end of 2015, with oil to remain in surplus for another couple of years.

“The market is still going to be in surplus by this time next year, so by the time you actually have supply and demand starting to equate, it will be well into 2017,” he told CNBC via telephone.

The oil industry is full of booms and busts. The norm for oil for the last decade has been $90 – $100 per barrel, but Brent is currently trading closer to $45 a barrel.

The U.K. oil giant BP announced on Tuesday it was slashing costs as it prepares for a long term low oil price environment. The company is planning for oil to be around $60 per barrel until 2017.

Jason Gammel, equities analyst at Jefferies, believes that $60 will not even be sufficient to balance the market and highlights pressure coming from Iranian barrels coming back onto the market.

As international sanctions on Iran are lifted, an increase in oil exports is expected from the country, adding to global supply and pressuring prices.

However, Pugh also highlights an obvious concern over Iranian supplies. He explained that the “market is expecting all this Iranian oil to come back”, adding that there is a risk that Iran does not comply with its side of the bargain when it comes to exports.

The Organization of Petroleum Exporting Countries or OPEC, which is largely made up of producers based in the Middle East, is the main group responsible for coordinating production levels in order to influence prices. OPEC’s next meeting will be held in Vienna on December 4, 2015.

Frances Hudson, global thematic strategist at Standard Life Investments said: “The feeling is that oil prices have been unnaturally low, but in terms of supply and demand it seems reasonable as Saudi (Arabia), as a producer, has decided to produce just enough to keep markets at this level. ”

“Saudi is the dominant player within OPEC and is estimated to cut production. When Saudi decides they are going to raise production that changes the output for OPEC.” said Hudson.

Hudson warns there is also an outside chance of an oil price shock within the next few months. If this happens, this would see the oil price rise, he added.

CNBC



59 Comments on "Pouring oil on troubled waters: ‘Surplus until 2017’"

  1. apneaman on Fri, 30th Oct 2015 8:22 pm 

    Are the Fracking Vampires Going Bust?

    http://www.truthdig.com/report/item/are_the_fracking_vampires_going_bust_20151028

  2. BC on Fri, 30th Oct 2015 11:43 pm 

    GregT, 😀

    I’m a former systems engineer, systems and database designer and programmer (financial services systems and apps in the 1980s to mid-1990s) who has never gotten it out of his system, although I no longer make a living doing that kind of work.

    Having started with BASIC and FORTRAN on a Radio Shaft 😀 TRS-80 in high school and then moving on to Pascal, COBOL (man, I’m ancient), C, C++, and IBM MVS/VM/UTS, SQL, DB2, etc., I found computer programming languages, editors, and compilers absolutely fascinating, challenging, and with so many opportunities to learn new tricks, hacks, optimization, etc. Hopelessly geeky stuff. 🙂

    I have extensive experience using SAS, SAP, and virtually every version of eCONometric software ever conceived, not that they have any utility in the “real world”.

    Perl, Python, Ruby, and Java general usage came after my time and coincided with the beginning of my work as an “eCONomic hit man”.

    Several years ago I made the break from MSFT to experimenting with Ubuntu Linux and Chrome and Chrome OS/Chromebook with Google’s (“UniComp” from Levin’s “This Perfect Day” :-)) Drive, Box.com, IBM’s Watson (free version), and other SaaS offerings.

    Although I use an iPhone, I’ve never been an Apple fanboy; but that’s my problem. 🙂

    Anyway, perhaps only NWR/MrNo will relate and appreciate this “reminiscence of a hopeless geek”. Thanks for indulging me. 🙂

  3. GregT on Sat, 31st Oct 2015 1:10 am 

    I started out with a TRS80 as well. Played around with basic and C, but never pursued it as a career. I’ve run Linux just to check it out. My best friend owned a computer store, so I’ve spent a fair bit of time on the hardware and networking ends of things. I mostly bailed on PCs after XP NTFS though. Been running Macs ever since. I won’t go back.

  4. GregT on Sat, 31st Oct 2015 1:15 am 

    I guess I should add; I do have both a windoze PC and a laptop. There are a couple of programs that I still use that aren’t available for Macs, so ya, I’m not a total snob.

  5. GregT on Sat, 31st Oct 2015 1:30 am 

    Funny how the memories are coming back. It really doesn’t seem that long ago. 2800 Baud FTP, green and black monitors, MSDos, 256K, 5 1/4s. We used to belong to a pirate BBS. We had 3.1 before it was released. If I remember correctly, 32 disks? $50 a meg of ram forever, then something about a factory in Japan burning down? $100 per meg for a while after that. My first hard drive was 8 megs. 4 of us got together and bought a single speed burner, 1200 bucks. That thing went 24 hours a day for weeks. We had every piece of software anyone could ever want. It all seems like yesterday.

  6. GregT on Sat, 31st Oct 2015 1:34 am 

    Sorry, that should have been 3.0. Thats when things really changed. GUI.

  7. MrNoItAll on Sat, 31st Oct 2015 1:34 am 

    BC — You’re a fucking dinosaur, man! I know, because I was one too. CICS/IMS/JCL/COBOL — the works! A consultant, mostly. Shortly after Y2K, when I realized the Indians and Philippinos were taking over mainframe, I went back to school and re-edjukated myself. I remember a couple of classes where almost all the students were COBOL mainfraimers trying to break into client server, and I remember how every single one of them dropped out — except me. I went on to become a dot net semi-guru — cutting edge web development for a world renowned financial services provider (name withheld for confidentiality reasons), key employee, C#.net, ASP.net, javascript, AJAX, WFC endpoints, JQuery, JQGrid, SQL Server — what am I leaving out. Just like in my former COBOL life, I’m an applications specialist. I figure out the business side of the application, and I do it fast. I’ve been compared to Spock doing the Vulcan mind-meld several times. Yeah, I think I know what you’re talking about. Hey, we’re both real close to Portland, OR metro. I’d take a chance at revealing myself if you’d like to hook up at a Starbucks somewhere, sometime. You’re a fascinating character, and we have everything in common from what I can tell. And you’re sure to be better looking than me, though not likely in as good of shape for our commonly ancient age. Just offering…

  8. GregT on Sat, 31st Oct 2015 2:37 am 

    “I’ve been compared to Spock doing the Vulcan mind-meld several times.”

    It’s funny that you should say that NWR, because my buddy with the computer store back in the day used to say the same thing. He’s now a senior exec for a major financial institution.

  9. Kenz300 on Sat, 31st Oct 2015 6:58 pm 

    Climate Change is real….. we will all be impacted by it……

    Exxon’s Climate Change Cover-Up Is ‘Unparalleled Evil,’ Says Activist

    http://www.huffingtonpost.com/entry/exxon-evil-bill-mckibben_561e7362e4b028dd7ea5f45f?utm_hp_ref=green&ir=Green&section=green
    ———–

    Oil and Gas Companies Make Statement in Support of U.N. Climate Goals – The New York Times

    http://www.nytimes.com/2015/10/17/business/energy-environment/oil-companies-climate-change-un.html?&moduleDetail=section-news-2&action=click&contentCollection=International%20Business&region=Footer&module=MoreInSection&version=WhatsNext&contentID=WhatsNext&pgtype=article

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