Crude Awakening? Top Oil Analyst Says ‘Worst Is Yet To Come’ For Crude
Karma Allen, writing on CNBC’s website this morning, February 11, 2015, quotes Tom Kloza, Chief Oi Analyst at Oil Price Information Service, saying the situation with the price of oil “is going to get a lot worse before it gets better.” Mr. Kloza’s warning follows yesterday’s revelation that top Citigroup Energy Analyst Edward Morse, “one of the more influential analysts in the energy space,” argued that the recent spike or ‘recovery upwards in prices, “is nothing more than short-covering; and, is in response to cuts by energy companies,” (shutting down of wells – the most in one month in nearly thirty years last month). It’s impossible to call a bottom at this point, which could as a result of oversupply and the economics of storage, fall well below $40 a barrel for West Texas Intermediate (WTI) — perhaps as low as the $20 range for a while,” Morse said. “The recent rally in crude prices, looks more like a head-fake, than a sustainable turning point,” Mr. Morse argued .
Mr. Kloza forecasts that “oil prices will bottom the second half of 2015; but, warned that West Texas Crude (WTI) could fall to the $30 range at some point in the second quarter;” and that, a “$20 handle,” was not out of the question. “I think the cycle has a long way to run out,” Kloza said on Tuesday’s Fast Money, on CNBC, adding that “the spread between Brent and WTI, could widen to about $10, or so,” at some point in the second quarter. It;s still about shale oil and the rig count is very misleading,” Kloza said He added, “there would be about 500K wells in the U.S. that produced fewer than 15 barrels of oil a day. “We’re going to fill up in storage; and, it doesn’t appear that there’s anyway around that. Some of the additional crude oil from the water will come to the United States — simply because we have the facilities to store it.”
WTI is down 92 cents this morning, or -1.86 percent to $$49.11, while Brent Crude is down $1.57, or -2.73 percent, to $54.80. I had begun to feel as if oil was near a bottom; but now, I am having my doubts. I do believe sentiment had changed in the last week; with traders more worried that they would be too late to call the bottom in oil and thus they began putting money back to work in this sector. The previous sentiment had been fear that oil was still in freefall; and no one wanted to attempt to catch a falling knife. But, these two gentlemen are noted experts in this sector; and, they may well be right. Others of course think we’re near a bottom. My guess is, we probably have more room to go on the downside. V/R, RCP