Chris ‘oil’ Williams, City Investor and City Financial Writer, joined Zak Mir and Mike Ingram, to discuss his views on the current oil market and his future predictions.
The supply side: Saudi Arabia trying to blow everyone out the water
Williams noted the situation surrounding Saudi Arabia, with the conclusion that its economy can’t maintain this looking forward, and that with it facing a budget deficit of 20% of its GDP, it cannot continue on the course of lower prices for much longer. In contrast, he added how OPEC countries are decreasing their production as a result of maintenance or political issues, with Venezuela facing the second type of problem.
When concerning Iran, it will be opening up at the end of the year, but Williams believes that the market has already priced this in. US shale forecast shows a reduction from 9.6 to 9 million barrels a day, with the majority of shale being hedged about $70-80 a barrel. However, he also commented that with hedges coming off in September-October time, production will have to stop or be significantly reduced.
Brent breaks $45 level, WTI to $35, and BP (LONDON:BP) offering 7.2% yields
Williams began by outlining the situation with Brent Crude, with his opinion judging this down to $40, which was a 2009 low, after breaking the $45 level. In terms of WTI Crude, he highlighted how the $35 level is written all over it.