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Last Updated : Jun 01, 2016 09:12 PM IST | Source: CNBC-TV18

Crude could hit USD 60 by fourth quarter of FY17: Energy Aspects

Talking about the Organisation of Petroleum Exporting Countries (OPEC) meeting scheduled for June 2, Amrita Sen expects no "fireworks" from it and says that there is a slim chance that all members would agree on a production level.

Due to the steadily decreasing production of crude oil, primarily coming from countries like Nigeria and Venezuela, Amrita Sen, Chief Oil Analyst of Energy Aspects, is bullish on crude prices and expects them to hit USD 60 per barrel by the fourth quarter of FY17.

Talking about the Organisation of Petroleum Exporting Countries (OPEC) meeting scheduled for June 2, she expects no "fireworks" from it and says that there is a slim chance that all the members would agree on a production level. 

Below is the transcript of Amrita Sen’s interview with Manisha Gupta on CNBC-TV18.

Q: What is your sense coming in from the Organization of the Petroleum Exporting Countries (OPEC) meeting? Most of the people really have factored in no movement or no output cut tomorrow.

A: I do not think an output cut was ever on the table, was it? The market might be getting a bit ahead of itself. I do think the market may be pleasantly surprised, because if anything going into the meeting, there is a lot of negative news around OPEC that Saudi Arabia does not believe in OPEC and how they could increase production to defend market share. On the contrary, it is very much going to be a cordial meeting between the members, there are new ministers pretty much for every single country and they are keen to achieve stability in the market. So yes, we are not expecting fireworks, but I do think do not be surprised if you do see some coordinated action between them even if it is not very concrete at this stage.

Q: So, a cordial yes, maybe, but what kind of a coordinated action are your pre empting from that because there already are statements from Iran, UAE and as you said, the Saudi Minister as well who are looking to ramp up productions this summer season?

A: I do not think there has been any production increase communication from Saudi Arabia in particular. What they have said and this is something that happens every single year. They always ramp up production during the summer, because they burn more crude domestically. The media tends to portray and take things out of context, particularly recent, a month I would say, UAE for instance, has no new projects coming online till next year. That too, it is a very small one. It has not talked about increasing production. The only country that has talked about production increases is Iran and of course, after sanctions, they will continue to do so. In terms of the coordinated action, if there is to be a coordinated action, it needs to be very much along the lines of, that the countries actually agree on a certain production level including Iran. Iran has to agree to that and that would be communicated. But of course, I am not saying that that is very much on the cards, but I will say to the market that do not expect that either. I think they are talking and you never know, just like Doha fears that this one could be a success.

Q: So what is your sense on the prices really because most of the banks and the brokerages are bullish. The long positions are at 2016 highs, almost there. Would you look at higher prices going forward?

A: Absolutely, we have been bullish a lot longer than banks have because non-OPEC supply is dropping. OPEC production as well, despite rising production from Iran and Saudi Arabia, it is actually down because of Nigeria and Venezuela. Production is falling very quickly, we are getting stocks draws this quarter alone when we are supposed to get bills seasonally. We have no bills and for next quarter onwards, we have very sharp draws into 2017. So we still expecting prices to trade into the USD 50’s in Q3 and into the USD 60’s in Q4. That has been our price forecast for over a year now and I think we are heading there.

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First Published on Jun 1, 2016 04:23 pm
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