Tags: Pickens | oil | recover | natural gas

T. Boone Pickens: Yes, I Still Think Oil Will Recover to $90 to $100

By    |   Wednesday, 29 April 2015 09:00 AM

For months, energy entrepreneur T. Boone Pickens has predicted oil prices will rebound quickly from the 10-month plunge that has seen them drop 47 percent. And he's not backing off that view.

U.S. crude traded at $57.17 Tuesday afternoon, already up 36 percent from the six-year low of $42.03 it hit March 18. Pickens thinks the price will keep rising to $70 by year-end and $90 to $100 in the next 12 to 18 months.

"You are now at record inventories," he tells CNBC. "A year from now you are moving toward record low inventories." U.S. inventories stood at 1.93 billion barrels as of April 17.

Pickens also maintains that natural gas will rise during the next year. "I'm not ready to call the turn on natural gas yet other than to say it will be more than $3 this winter, and I'm long natural gas in the winter," he notes.

Natural gas has dropped to an almost-three-year low, trading at $2.54 per million British thermal units Tuesday afternoon.

"There's been so much switching over to natural gas that the supply is going to feel it at some point."

Meanwhile, investment legend Warren Buffett drew a lot of attention in the fourth quarter, when his Berkshire Hathaway dumped shares of Exxon Mobil, ConocoPhillips and National Oilwell Varco.

But, "based on past history, Buffett's success in the resource sector has been a mixed bag," writes John Manfreda of Oilprice.com.

He scored big on Petro China, selling in 2007 for a profit of $3.5 billion. But he lost several billion on his investment in ConocoPhillips, which began in 2008.

"In order for Buffett to buy a stock, the company has to pass this set of criteria: high margins with a low amount of debt (it doesn't take a genius to run them); strong franchises and freedom to price, with predictable earnings," Manfreda explains.

"This set of criteria sounds great when investing in a consumer goods business, but when investing in the resource sector, it's almost impossible to achieve. The energy industry has higher capital spending requirements than other industries."

The S&P 500 Energy stock Index has returned a negative 10.1 percent during the past year, compared to positive 15.5 percent for the overall S&P 500.

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For months, energy entrepreneur T. Boone Pickens has predicted oil prices will rebound quickly from the 10-month plunge that has seen them drop 47 percent. And he's not backing off that view.
Pickens, oil, recover, natural gas
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2015-00-29
Wednesday, 29 April 2015 09:00 AM
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