Brent oil at $70 a barrel is needed for companies to continue increasing production, said Greg Sharenow, executive vice president at Pacific Investment Management Co.
Brent will trade around $70 by the end of this year and West Texas Intermediate at $64, Sharenow said in an interview on Thursday in New York. Oil has rallied this year on speculation that a falling number of rigs will reduce U.S. production. Output has already peaked, Sharenow said.
“This has been returning to a more normalized price from what was an extreme environment,” he said. “We need $70 Brent to produce enough oil. That’s what the companies need to start investing, not in a massive amount, but financially to be healthy enough to grow production next year.”
WTI for June delivery slid 14 cents to $60.36 a barrel at 10:17 a.m. on the New York Mercantile Exchange. Prices reached $60.93 on May 6, the highest settlement since December after falling to a six-year low of $43.46 in March.
U.S. crude production was 9.37 million barrels a day last week, according to Energy Information Administration estimates. Production reached 9.42 million on March 20, the highest level in weekly data going back to 1983.
The U.S. oil rig count fell to 668 last week, the lowest level since 2010, according to Baker Hughes Inc. Production will average 9.19 million barrels a day this year, up 6.1 percent from 2014, according to the EIA.
“Production has peaked,” Sharenow said. “We are probably in a gentle decline.”