Big-name oil analyst provides insight on oil price trends

By Luke Geiver | April 05, 2017

Oil price drives the narrative of global oil supply and demand, according to Dave Pursell, managing director and head of macro research at Tudor, Pickering, Holt & Co. Pursell, a respected energy analyst, told a crowd gathered in Fort Worth, Texas, at an event focused on the Permian Basin, that the realities of global oil supply and demand don’t always match the current stories in the media that explain why demand or supply across the world is either up or down. When oil was trading in the $130/b range, demand wasn’t that great, he cited as an example. By the end of the year, Pursell believes oil will trade in the $65/b range and could reach $75/b by 2019. “You can take that to the bank,” he said.

According to Pursell, the demand market is getting better and inventories are being drawn down. “This isn’t a faith-based argument, this is a fact-based argument,” he said.

Pursell focuses on the shape of the forward oil futures curve to help predict the price of oil. The shape of the forward curve and the trajectories of oil inventories, he said, is more important than the current price of oil. The shape of the curve creates incentives for buyers and sellers to either hold or move product. The current shape indicates that by the end of the third quarter, inventories could be back to normal as buyers look to purchase and utilize stock.

Certain global activity is also falsely considered a major variable in the price of oil. When Greece was undergoing a time of major economic and stability turmoil some were linking the actions in Greece as a potential detriment to the price of oil. Pursell’s team, which is often refrenced to explain the current state of oil prices, said that his team’s research showed that Greece was only slightly more important to the global oil picture than the state of Rhode Island was.

Activity in the Permian could impact oil prices in the near term. Production that is brought on fast in West Texas could stymie oil prices in the next year or so, he said. Concerns about oil takeaway capacity in the Permian Basin are also present, but Pursell believes that there will be enough pipeline capacity put in place within the next two years to handle new production from the Permian. “You can build pipes in Texas. It won’t be a problem,” he said.

Pursell delivered his talk at the DUG Permian Basin 2017 event organized by Houston-based Hart Energy.