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The pundits continue to hawk the same reasons for the fall in crude oil prices today.
These are always "spearheaded" by comments about surging global supply led by the onslaught of unconventional (tight and shale) oil production in the United States.
Invariably, what's missed by these "TV sages" are the pricing dynamics kicking in that virtually guarantee an increase in oil prices as we move into 2015.
They're based on the actual condition of the oil market, not some knee-jerk emotional commentary delivered by the talking heads on TV (some of whom are actually short the market).
The good news is more of the guys who really understand what's going on have begun to mirror what I have been saying for some time – including some well-known economists.
One of them is Steve Kopits, the high-profile managing director of Princeton Energy Advisors, who recently came out with a particularly bullish projection…
According to Kopits, "In permitting low oil prices, the Saudis seek to bring the market back into equilibrium. At present, our calculation of break-even system-wide is in the $85 to $100 a barrel range on a Brent basis."
But Kopits isn't the only one who's optimistic about oil. The legendary Mark Mobius, the emerging market guru, chimed in this week that he expects Brent to rebound to $90.
Crude Oil Prices: A Significant Squeeze Ahead
This move higher in oil prices won't happen overnight. Instead, it will happen gradually.
Absent any move by OPEC to cut production – an unlikely short-term prospect given the current Saudi position – it will be driven by traditional supply and demand factors. In fact, the current low price environment is actually setting the scene for a major uplift in prices.
A recent article by Dan Steffens illuminates this point.
Dan Steffens is one of the best (and most readable) analysts you can find. He and I have had a like mind for some time on what the real impact is going to be from the current "oil glut."
According to Dan, the current low crude oil price could be overkill and result in the next "Energy Crisis" by early 2016.
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.
You say "North America and deepwater projects are the only places with meaningful production upside".
But have you forgotten China's 1,115 trillion cubic feet of technically recoverable shale gas resources? They can get water from desal plants when they're online with shale gas technology.
And the move from liquid to gas hydrocarbons is kind-of guaranteed, which will hold oil prices down.