Rob Thummel, a portfolio manager and managing director at Tortoise Capital Advisors commented on the commodity's gains and what to expect moving forward.
The Production Cut
Thummel noted that the agreement to cut global production by an aggregate amount of 1.8 million barrels per day represents almost 2 percent of the world's total global supply. The portfolio manager suggested that the agreement occurred at a time when both OPEC and non-OPEC members have "run out of patience" for low oil prices and action needs to be taken now to support the commodity and stabilizes its price moving forward.
"Consequently, we expect stable oil prices throughout 2017 and beyond," Thummel added. "Oil prices likely remain range bound between $50–$60 per barrel over the next few years. This is a real sweet spot for oil prices as global oil demand for oil related products will continue to grow while low cost oil producers earn adequate returns on capital."
Manager's Perspective
Thummel continued that the agreement "appears legitimate," as it also calls for a monitoring committee to ensure compliance. However, he suggested that OPEC's words are "not always congruent with their actions so skeptics will continue to question any deal until OPEC and non-OPEC producers prove that production is declining."
Meanwhile, oil prices gained on Monday mostly due to technical reasons and short covering. From a fundamental perspective, global oil inventories remain well above historical averages. However, this will change once the supply cut comes into effect as global demand will exceed global supply.© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.