Oil is heading toward another crash…”oil will re-visit the US$20 level”
Akin Oyedele
BusinessInsider.com
Apr. 22, 2016
Some analysts are betting that the recent jump in oil prices will be short-lived.
A big meeting of producers in Doha, Qatar last Sunday ended without an agreement to cap output.
Christopher Wood, author of CLSA’s weekly GREED & fear letter, said Thursday that this proves oil will drop to $20 a barrel — one of the most bearish calls out there.
West Texas Intermediate crude, the US benchmark, traded as high as $44.45 a barrel Friday. Brent crude, the international benchmark, rose to $45.89.
To recap Doha, members of the oil cartel OPEC and nonmembers met to try and agree on output ceilings in an effort to help lift prices. Many economies, including OPEC’s de facto leader Saudi Arabia, have been strained by the price collapse.
But Iran — Saudi Arabia’s geopolitical rival — has an opposite agenda. It is increasing production to start exporting again, now that economic sanctions have been lifted.
The Saudis refused to sign an agreement without Iran, and so the meeting flopped. That sent oil prices lower by 5% in futures trading last Sunday.
But by Friday, US oil was headed for an 11% weekly gain. Wood said in his note that he finds the rally baffling:
GREED & fear also has no claim to be an energy expert. Still GREED & fear remains highly skeptical of this sanguine view on oil with the base case here that oil will re-visit the US$20 level, sooner or later, in the absence of an effective OPEC instigated production freeze.
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