Crude prices are currently at their healthiest levels since mid-2015. Analysts have begun to be optimistic about seeing prices around the $60 level, a trend that they attribute to a phenomenon that they call backwardation (when futures contracts expiring in the future trade now at prices lower than the market sees currently).
When there is backwardation, there is much incentive for refineries to buy crude from drillers ahead of time, hoping to beat price rises. It leads to higher oil prices in the immediate term. Buyers are ordering oil in the front months now – it’s a backwardation phenomenon – rather than follow the contango futures pattern usually seen for crude.
The trend that said is sending oil prices up right now to $60, however, may not last long, backwardation trends don’t come with long-term effects.
Other Experts Expect Oil to Go to $90 a Barrel
Analyst Bill Strazzullo of Bell Curve Trading is best known for predicting the plunge that took crude to $30 levels back in 2013. His take on the current situation is to predict not only that oil is on-track for a boost in the immediate term, but that there is a major rally on the horizon unlike anything seen in the past few years. His predictions see a steady rise, putting the price of oil at between $90 and $100 a barrel three years from now.
Bell Curve Trading isn’t alone in in its optimism, a research paper by Goldman Sachs sees robust demand growth in 2017, OPEC members cutting back on production in keeping with their agreements, and oil prices growing much higher.
Preparing Now
Taking advantage of a healthier oil future can require action today, according to Sigma Drilling Technologies, the pulsation solutions company that supplies drillers with precision equipment to improve efficiency. The manufacturer of pulsation control equipment has seen drilling installations begin work early today with an eye to the future. Prices can hardly be kept down for long in a world deeply dependent on oil, after all.
Contact Sigma at (281) 656-9298 to schedule a free demonstration on how to improve drilling efficiency while achieving superior performance for drilling rigs.
