TREND FORECAST: Oil Price War: Winners, losers, what to expect next

Posted 4/20/16

 

This item is available in full to subscribers.

Please log in to continue

Log in

TREND FORECAST: Oil Price War: Winners, losers, what to expect next

Posted

 

TREND FORECAST
Oil Price War: Winners, losers, what to expect

KINGSTON, NY, 20 April 2016 —Oil prices crashed in Asia some 7 percent on Monday following the failure of OPEC nations to come to an agreement at an emergency meeting on Sunday for a production freeze.

However, despite the bearish news, the downtrend rapidly reversed when the New York markets opened later in the day. Also boosting prices, was an oil strike by workers in Kuwait that nearly halved the OPEC members' crude production. 

Despite an end to the oil workers strike and no agreement for an OPEC freeze, oil prices, while slipping, continue to maintain Monday's gains. Where are oil prices going, what should markets expect and which nations will be hurt the most?


Global media have reached out to Trends Journal Publisher Gerald Celente this week to get some answers to these questions:

Q) Would the failure to agree on a freeze this time put major downward pressure on oil prices?

A) While it will put downward pressure on oil prices, possibly pushing them back to their recent lows, we still maintain our forecast that in the absence of strong global economic growth, crude will fluctuate between the low $30 to mid $40 range.

Q) Can the market now lose confidence in statements on
 an oil-production freeze?

A) For us, there was little confidence from the beginning that there would be a production freeze. All the production-freeze statements did was boost crude prices without regard to supply-and-demand fundamentals.

For example, from the onset, Iran stated clearly that it would ramp up production following the lifting of Western sanctions. And, Iran did not send a representative to the Doha meeting on Sunday. Then there are all the other OPEC and non-OPEC oil-rich nations, whose Gross Domestic Product is oil-dependent, that are now severely suffering economically from low prices and low demand. They would not likely freeze or cut production. As the saying goes, “talk is cheap,” and for commodity traders, the cheap talk was enough to artificially, but temporarily, boost oil prices.

Q) Do you think oil-producing countries’ requirements are so different that an agreement on
 an oil-production freeze is impossible?

A) Yes, particularly among oil-rich nations lacking multiple GDP revenue streams. Few nations, such as Russia, rich in natural and human resources, can move toward self-sustainability; thus their requirements are different. Other nations, such as Kuwait, Saudi Arabia, Venezuela, Qatar, etc., are GDP oil-reliant and cannot economically sustain a long-term freeze.

And, as we maintain, if a hard freeze were to occur and oil prices rose, oil rig/production that had been shut down would again start pumping, supply would dramatically outstrip demand, and oil prices would again fall.

Q) If not, what time could it take for oil producers to reach an agreement and how would that affect the oil market?

A) Again, to us it’s more of a supply-and-demand issue rather than an agreement to freeze production. Hypothetically, in the event that oil prices dramatically dropped and there was an oil-freeze agreement arranged out of desperation, the effect on the oil market, for the reasons stated above, would be temporary.

 

©MMXVI The Trends Research Institute®