Tags: David Kotok | oil | crude | gasoline

Money Manager David Kotok: Plunging Oil Could Fall to $15

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By FJ McGuire   |   Wednesday, 19 Aug 2015 01:09 PM

Tumbling oil prices have hit six-year lows, and Cumberland Advisors' David Kotok predicts that could plunge even lower.

"We could go back to $15 or $20, this is a downward slope, we don't know a bottom," the influential money manager told Bloomberg TV. A year ago, oil was about $100.

U.S. oil prices hit their lowest in almost six and a half years on Wednesday after U.S. data showed an unexpected rise in crude stockpiles.

U.S. crude oil futures, also known as West Texas Intermediate (WTI), were down $1.20 at $41.42 a barrel by 1450 GMT, after touching a low of $41.18. The front-month, September, U.S. crude oil contract is due to expire on Thursday. North Sea Brent crude was down 90 cents at $47.91 a barrel.

Oil has tumbled more than 30 percent since this year’s peak close in June amid signs that producers are maintaining output even after a surplus pushed prices into a bear market.

A further decline to $15 a barrel would be huge. Oil hasn't traded that low since early 1999, when gasoline at the pump was selling for under $1 a gallon, CNNMoney reported.

The Organization of Petroleum Exporting Countries has pumped above its 30 million-barrel-a-day quota for more than a year, according to data compiled by Bloomberg. Angola plans to ship 1.83 million barrels a day in October, the most since November 2011, according to a preliminary loading program obtained by Bloomberg. That compares with 1.77 million barrels a day from Africa’s second-largest crude producer in September.

Meanwhile, Iraq must increase oil output to meet the needs of its growing population and provide services, Prime Minister Haidar Al-Abadi said on his website. The nation’s production climbed to a record 4.18 million barrels a day in July, according to the International Energy Agency.

If the Iran nuclear deal is approved, sanctions relief will allow Iran to drastically increase output. That could trigger a reaction from the Saudis, Iran's longtime rival in the region, Business Insider points out.

"The Saudis' best weapon is the lowest oil price at maximum volume. They have enough financial reserves to have staying power for years," Kotok.

He also predicted an increase in consumer spending on cheaper gasoline.

"When the oil price goes down that means you get the first kick, but the you have to wait for the consumer to wake up and say 'Gee, I’m going to have more money for longer, I’m going to spend it'," Kotok said. "I think that there is a huge boost in consumer spending coming when people begin to accept the fact that this is a permanent shift not a temporary shift."

Kotok's views on the economy and financial markets are closely watched. The 72-year-old co-founder of Cumberland Advisors manages more than $2 billion in assets.

Meanwhile, U.S. crude stocks were up 2.6 million barrels at 456.21 million barrels last week, the U.S. Energy Information Association (EIA) said. Stocks at Cushing, Oklahoma, the delivery point for U.S. crude futures, rose 326,000 barrels to 57.44 million.

This was in sharp contrast to a Reuters poll, which forecast an 800,000-barrel inventory decrease. The American Petroleum Institute reported on Tuesday that U.S. crude stocks had fallen by an even greater margin — by 2.3 million barrels in the week ended Aug. 14.

Prices had steadied earlier on Wednesday after a six-week rout driven by global oversupply and concerns about falling demand in Asian economies and the United States.

U.S. oil production is at record levels and producer costs appear to be declining, with no output scale-back anticipated.

Oil has lost about a third of its value since June and prices have been hovering just above six-year lows for the past week. The downward trend has been driven by global oversupply and record stockpile levels, analysts say.

(Newsmax Wire Services contributed to this report).

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Tumbling oil prices have hit six-year lows, and Cumberland Advisors' David Kotok predicts that could plunge even lower.
David Kotok, oil, crude, gasoline
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2015-09-19
 

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