New Year, New Oil Outlook: Pros Debate Commodity's Trajectory

WTI crude oil has lost 40 percent since early October, and experts are conflicted on whether the worst is yet to come for the global commodity.

Considering Big Dividend Payers

One of the biggest contributors to the large decline in oil prices in recent months is an increase in output in Russia and from U.S. shale producers, John Kilduff, founding partner at Again Capital, told CNBC Wednesday. OPEC has "circled the wagons again" and is joining forces with Russia to replicate the 2017 through October 2018 strategy of maintaining a very strict production rate and bringing down global oil inventories to normal levels, he said. 

Companies are guilty of having a "blue sky mentality" and failed to hedge part of their future production as in prior years when prices were rising, he said. A dip in oil to the $30 level would be problematic, while oil in the $20s would trigger bankruptcies, Kilduff said. 

Investors should look at American E&P companies that offer a 6-7-percent dividend yield, the Again Capital exec said. 

OPEC Losing Power?

OPEC has less control over global oil markets in 2019 than in prior years, Bloomberg's Stuart Wallace said on "Bloomberg Surveillance" Wednesday. The cartel can still enact dramatic policy, but there are few if any non-member allies the group can bring on board to support its objectives, he said.

December PMI data from China "is not looking wonderful" for the oil market, and there is little OPEC can do ahead of its April meeting, he said. 

OPEC members "haven't really figured out" how to deal with rising U.S. shale production, he said, adding that the group is now being forced to alter its way of thinking from policy developed over a five- or 10-year period to one or two quarters.

Related Links:

In One Way At Least, The Crazy Oil Market Actually Got A Little More Normal In 2018

The FreightWaves Oil Report: "Puts" Put The Pressure On Petroleum Prices