Jan 12, 2016 05:48 PM IST | Source: CNBC-TV18

See sub-$30 oil; remain negative on oil prices: Fat Prophets

David Lennox, Analyst, Fat Prophets, says crude prices will remain volatile until no cuts are announced from major producing nations, from Organization of the Petroleum Exporting Countries (OPEC) or any of the major companies in Saudi and US.

In another major tumble, Nymex crude is trading below USD 31 per barrel (bbl). With the US benchmark price dropping to its lowest level in 12 years, the slide marks a global concern. In addition, Brent is just over USD 31 per barrel.

In an interview to CNBC-TV18, David Lennox, Analyst, Fat Prophets, says crude prices will remain volatile until no cuts are announced from major producing nations, from Organization of the Petroleum Exporting Countries (OPEC) or any of the major companies in Saudi and US. He expects that Brent may go sub-USD 30 per bbl in the near-term.

"We do think that the range will probably be somewhere where it is trading now for its top side and potentially probably about USD 29 per barrel on the bottom side for the next quarter," he adds. 

Meanwhile, Lennox says:"We are awaiting for a supply response which just has not been forthcoming; so we are going to remain on the negative side for oil prices until that happen."

Below is the verbatim transcript of David Lennox’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Sonia: Our colleague from JP Morgan was just telling us that he would not be surprised to see oil prices recover significantly in the first part of 2016. Is that your expectation as well?

A: At this stage, we will have to suggest that our expectations after the oil price trade, remain volatile and be probably still on a downward trend. The reason we say that is because we have not seen at this point in time any significant change in terms of the factors that have been pushing the price down and that is the oversupply situation.

We have seen no major cuts announced from any of the producing nations, from Organization of the Petroleum Exporting Countries (OPEC) or any of the major companies in Saudi, US. So, that is going to continue we believe to put pressure on the downside certainly in the near-term for oil prices.

Latha: What levels are we looking at, USD 31 per barrel look as bad as it gets or does it even go below USD 30 per barrel?

A: Brent now is just over USD 31 per barrel, this is in area where we thought that prices would perhaps start to stabilise but we were only saying that because we believe that there would be a rational response from the supply side and we have not seen that response yet.

So, until we do see that response, the oil prices will probably continue to drift lower and probably go sub USD 30 per barrel on Brent in the near-term.

Latha: What would you look at as a range in an average for the January-March quarter?

A: Certainly at this point in time we would be looking for an average probably for Brent around about the USD 31 per barrel mark. We do think that the range will probably be somewhere where it is trading now for its top side and potentially probably about USD 29 per barrel on the bottom side for the next quarter.

Again, it is primarily because we are awaiting that supply response which just has not been forthcoming. So, we are going to remain on the negative side for oil prices until that happens.

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