PIRA's Ross Sees Oil Rebounding as Demand Set to Top Supplyby
Gary Ross predicted last year's crude oil market rout
PIRA Energy chairman sees spending discipline curbing output
The oil guru who predicted last year’s rout before turning bullish in 2015 says "new capital discipline" in the industry will allow demand to catch up with crude supplies, boosting prices.
Gary Ross, the founder and chairman of consultants PIRA Energy Group, said a key driver for rising prices will be the lack of spare production capacity in the industry to meet growing demand. There’s “not much available,” he said in comments Thursday at a seminar hosted by PIRA in New York.
It will take the U.S. shale industry at least nine months to ramp production back up and boost output after prices rise to more profitable levels, Ross said. Output is falling every month, especially in the Eagle Ford and Bakken shale fields in Texas and North Dakota, he said.
Ross, who last year turned bearish on oil before prices shrank by half, is at odds with other analysts and investors bracing for further declines. The recent rally in prices will fade because of weak fundamentals, Goldman Sachs Group Inc. analysts including Jeffrey Currie and Damien Courvalin said in a report Thursday.
Saudi Arabian officials hinted at a PIRA conference last October that they would change their oil policy. OPEC’s biggest oil-exporting nation announced weeks later that it would maintain production to defend market share, sending prices plunging.
There’s “no reason to change policy, because it’s working,” Ross said when asked about Saudi policy Thursday. The drop in U.S. shale activity was one of the goals of the Saudi policy, he said.
Ross predicted Saudi Arabian Oil Co, the state-run oil company, will boost its official selling price for crude in November. “Next month, they are going to go up, you wait and see,” he said, while not specifying a region. Aramco cut November 2015 pricing for oil sales to Asia and the U.S., according to an e-mailed statement on Oct. 5.
West Texas Intermediate oil rose $1.62 to settle at $49.43 a barrel on the New York Mercantile Exchange. It was the highest close since July 21. Brent, the benchmark for more than half the world’s crude, climbed $1.72 to $53.05 on the London-based ICE Futures Europe exchange. Both crudes remain more than 50 percent lower than their peak prices last year.