Sunday, January 25, 2015

Oil prices going to $200 barrel?


The head of Italian energy company Eni Spa urged OPEC on Wednesday to act to restore stability in oil prices, which he warned could overshoot to $200 per barrel several years down the road because of low investment now.

Claudio Descalzi told Reuters Television he expected prices to stay low for 12-18 months but then start a gradual recovery as U.S. shale oil production began falling.


 "A lot of our projects are long term to have production in five or six years. And that is a problem. If you are cutting capex (capital expenditure) drastically now - we can have a lack of production in four or five years creating a new increased oil price at $200 maybe," Descalzi said.

I do not know if oil prices will go to $200 per barrel but I do know that all the recent production from US shale will dry up in 12-18 months and prices will head higher. The whole "shale revolution" was nothing but a red queens race where more and more wells had to be drilled just to maintain production not to mention grow production. I do know that with low prices there will develop a big dip in spending on development drilling and replacement of reserves. Once the shale players are driven out of business there goes the marginal supply and oil prices will increase. This will be a great opportunity for speculators like myself.

No comments:

Related Posts Plugin for WordPress, Blogger...