I chatted yesterday with Bob McNally, whose well-received January 2017 book Crude Volatility traced the history of oil markets and analyzed (among other things) the withering of OPEC's limited power.
He shared his views on the recent attempts by the Saudi-led cartel and other producers including Russia to regain market influence; Trump's policy moves; what's next for prices, and more. Here is my full interview.
Some key takeaways:
OPEC: "They have been more successful at managing sentiment and influencing traders for short periods of time than they have been at their traditional role of a swing producer, which is managing supply," McNally, president of the Rapidan Group, says.
Crystal ball, part 1: Despite the recent blip upwards after falling to their lowest levels of the year last week, the bearish McNally sees prices heading much lower in the not-too-distant future, getting into the low-$30s per barrel by the first half of next year, if not sooner. The recently extended production-limiting deal between OPEC, Russia, and others isn't close to enough to tame the bears.
Crystal ball, part 2: McNally also sees a big uptick in prices after "one more bust phase." He agrees with analysts who say lower industry capital spending in recent years on new projects worldwide will hinder supply in a few years.
- But there's more to it: McNally says the global thirst for oil is going to be higher than many believe. He believes that five years from now, oil prices will be well north of $100 per barrel.
President Trump's policy: The most significant policy change for the industry is not removal of regulations but rather the administration's favorable view of oil-and-gas infrastructure construction, signified by approval of the Keystone and Dakota Access pipelines.