This is the second warning we've seen in a week about the possibility of oil hitting $200 a barrel in the near future if searching for new supply dries up owing to a lack of investment as most majors roll back their E&P spending and cut jobs.
See our earlier post, The Frack Thickens.
Brent crude prices steadied above $48 a barrel today, recovering from earlier losses as the dollar weakened against the euro. Prices were also supported after OPEC's Secretary-General, Abdullah al-Badri, commented yesterday that prices may have bottomed and warned of a risk of a future jump to $200 a barrel if investment in new supplies was too low. Brent is 0.7% higher at $48.49/bbl, while WTI is up 0.6% at $45.40.
Certainly, this could be smoke and mirrors owing to the pain lower energy prices seem to be causing the industry. But just today the newest bond king, CEO of Doubleline Capital, Jeffery Gundlach, stated oil would not reach $90 a barrel this year, a view somewhat at odds with one oil magnate T. Boone Pickens had suggested earlier.
Gundlach admitted he knew less about oil markets than Pickens but noted he knew a lot about markets and had put lots of his own money where his view was. So this ought to make for some interesting theater as 2015 rolls on.
In fairness to Gundlach he did mention that geopolitical risk were still there. As an aside, here's one of our favorite recent Gundlach quotes: “People often repeat things people tell them without thinking,“ he said. “There are phrases in [markets] that make absolutely no sense, kind of like talk from central bankers.”
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