Energy Prospectus

After issuing clear warnings on this program that sub-$50 oil prices were going to be short-lived, oil expert and geological consultant Art Berman returns to the podcast this week to explain why today's $70 oil prices will go higher -- likely much higher -- and start materially contricting world economic growth.

Art explains how the current glut of oil created by the US shale boom -- along with high crude output by both OPEC and non-OPEC producers -- is a temporary anomaly. Fundamentally, we are not finding nearly as much oil as we need to continue the trajectory of the global demand curve. And at the same time, we're extracting our reserves at a faster rate than ever. That's a mathematical recipe for a coming supply crunch --
it's not a matter of if, but when: https://www.zerohedge.com/news/2018-06- ... othing-yet

"Perceptions control the oil price near-term, but the fundamentals control the oil price long-term."

Fundamentals point to the need for higher oil prices.
1. Four years of very little capital spent on exploration has us now depleting known reserves rapidly. Eventually, the oil "savings account" will run out.
2. Technology like horizontal drilling and better completion methods just drains reserves faster, it does not create more oil.
3. Per the last IEA "Oil Market Report", during March & April demand for oil exceeded supply by ~1,000,000 barrels of oil per day. U.S. oil inventories have been on decline for 15 months.
4. U.S. and OECD demand is fairly flat, but Asian + African demand is going up, up, up.
5. "FEAR" that Trump's Trade War will lower demand is a "perception" that is likely WAY OVERBLOWN.
6. The Global economy is growing (MUST GROW), so demand for energy, primarily from oil, must go up.

MY TAKE: The "Right Price" for oil is $65 to $70 today. The spike above $70 was an over-reaction to the Iranian sanctions. Everything points to the "Right Price" for oil being a lot higher six months from now. My guess is that global demand for oil will exceed supply by 2,000,000 barrels per day this summer and OPEC + Russia have little excess production capacity left. The HUGE gap (over $10/bbl) between Brent and WTI is another over-reaction to the FEAR being created by the shortage of pipeline takeaway capacity from the Permian Basin.