Robert Rapier: Oil to Remain in $50-$70 Range Over Next Year or Two

Interview with Robert Rapier of Energy Trends Insider. Robert is a chemical engineer with 20 years of international engineering experience in the chemicals, oil and gas, and renewable energy industries, and holds several patents related to his work. Full audio podcast can be found on the Newshour page here or on iTunes here in Hour 1 at the 45:37 mark.

OPEC production cuts this June

"I think Saudi Arabia is trying to defend market share and that they miscalculated back in the fall when they decided not to leave production quotas exactly where they were. I don't think that they anticipated that prices would plummet as much as they did. But they have made some comments about how they are not the high-cost supplier so the high-cost supplier should be the ones that go offline first and they were referring to shale. And they have continued to try and keep their market share but there's been increasing comments from various members that...we really need to cut production... So, there's going to be another OPEC meeting I believe in June and I think there's a good chance at that point that they at least announce some cuts to production or at least give some signals to the market that supply will be somewhat limited. I think that they are going to try and prop prices up—there's a lot of pressure from many OPEC members to do that and I expect them to do that."

Fracklog waiting to come online at $70 and higher

"There are a lot of wells that have been drilled but not completed so...they're sitting there and waiting for prices to rise a little bit and you will see some headwinds. I didn't think $40 was sustainable on oil prices...but then now a lot of these companies, especially these small companies, have overshot I think with the expectation that we are going back to $70 and I don't know that that's going to be the case either. We're going to have some headwinds here, and there are going to be some companies that are going to bring production online [once we get closer to $70]."

Oil to remain in $50-$70 range next year or two

"I expect us to be in the $50-70 range for a while until we work through some of the inventory and until demand catches up a little bit. I mean demand is still going up. I keep seeing these articles about demand going down. I mean the EIA just came out and said that they expect demand to increase this year over last year. So they expect demand to accelerate to around 1.1 million barrels growth over last year. So demand continues to go up and supply will continue to go up to keep pace and I think as that happens a year or two years down the road we do break out of this range and we trade higher but I think for now we are going to be in a range of $50-$70. I just don't think anything below $50 is sustainable for any length of time and there's going to be a lot of headwinds at the $70 dollar level."

Time to lighten up on smaller oil and gas companies

"I was just looking at some of the small oil and gas companies that have run up 30% over the last three months. I think they've probably overdone it a little bit. Some of these guys are still not going to be cash flow positive anytime soon but their share price has increased by 25-30%. This might be the time to lighten up on some of those guys."

Listen to the rest of this interview with esteemed energy analyst Robert Rapier on the Newshour page here or on iTunes here (Robert's portion starts at 45:37). Subscribe to our weekly premium podcast by clicking here.

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