Tags: Della Vigna | US | oil | output

Goldman's Della Vigna: US Needs to Cut Oil Output, Not OPEC

By    |   Friday, 03 April 2015 06:20 AM

The United States and other non-OPEC nations, rather than OPEC, must cut their oil output to put supply back in line with demand, Michele Della Vigna, head of European energy research at Goldman Sachs, tells CNBC.

Oil prices have dropped 54 percent since late June and hit a six-year low last month.

"I think the market has realized that where we need to find the adjustment is onshore U.S. and that's where the market is focused," Della Vigna notes.

"The adjustment is starting to happen there. Clearly an OPEC cut would help getting to the equilibrium faster, but at the end of the day, it is non-OPEC that needs to sort out the oversupply that it has created."

After hitting at least a 33-year high, U.S. crude production slipped 0.4 percent last week to 9.39 barrels a day.

Richard Fisher, former president of the Dallas Federal Reserve, disagrees with Della Vigna. We can thank Saudi Arabia for much of the oil price plunge, he says. "The Saudis have engineered" the move, Fisher said in a recent speech, CNNMoney reports.

Saudi Arabia led OPEC to reject production cuts, and the nation has offered price reductions to its customers. Presumably the Saudis are trying to drive high-cost suppliers, such as U.S. shale oil producers out of business.

"We are a huge supplier of energy. The Saudis took a while to realize what was going on," Fisher said, referring to the growth of U.S. output.

Low oil prices also cause pain for Iran, Saudi Arabia's hated neighbor, he noted.

Given Saudi Arabia's policy, Fisher doesn't expect oil prices to rebound back to $100 anytime soon. "From a budget stand point, [the Saudis] have reserves that can handle this," he said.

While many experts expect oil prices to keep falling, Darren Wolfberg, head of U.S. cash equity trading at BNP Paribas, doesn't.

Employing technical analysis, he tells CNBC that oil has formed a double bottom around $44.

If crude can break above $52, it can easily jump another 10 to 20 percent, he predicts. A 20 percent gain from $52 would put oil at $62.

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The United States and other non-OPEC nations, rather than OPEC, must cut their oil output to put supply back in line with demand, Michele Della Vigna, head of European energy research at Goldman Sachs, told CNBC.
Della Vigna, US, oil, output
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2015-20-03
Friday, 03 April 2015 06:20 AM
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