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Tags: ron insana | oil | crude | price

CNBC's Ron Insana: Oil Price Won't Rebound Before 2017

CNBC's Ron Insana: Oil Price Won't Rebound Before 2017
Ron Insana (roninsana.com)

By    |   Friday, 11 December 2015 05:17 AM EST

Don’t expect oil prices to rebound anytime soon, and it’s best for investors to prepare for an extended slump, warns Ron Insana, a CNBC and MSNBC contributor.

“Energy analysts are confidently predicting that oil prices will rebound by 2017, as global supply and demand come back into balance,” Insana, the author of four books on Wall Street, wrote on CNBC.com.

“This long-run thinking defies the logic of the oil markets. Not only has oil been among the most volatile commodities in modern economic history, it also has a tendency to spike, crash and then remain depressed for years on end,” he wrote.

“Analysts have focused on the 18-month decline that has seen crude-oil prices drop from $107 in June 2013 to below $37 on Tuesday — a 65-percent decline. But crude oil is actually down a whopping 74 percent from its 2008 high of $147 per barrel. That decline has been in force for seven long years, since the dawn of the fracking age,” he wrote.

“History tells us that, while price spikes tend to be sharp and somewhat short-lived, bear markets in oil, at least since the 1980s, tend to be quite long, drawn-out affairs,” he said.

“When prices crashed in 1985, they went from $35 a barrel to $10 a barrel by the following year. And then they averaged just under $20 until 2003. The market flat-lined for 17 years, with an occasional bear-market rally.”

Oil is trading near levels last seen during the global financial crisis as Saudi Arabia leads the Organization of Petroleum Exporting Countries in maintaining output and defending market share against higher-cost producers, Bloomberg reported.

U.S. refiners typically drain tanks to reduce their tax burden, which is determined by year-end levels, and nationwide U.S. crude inventories remain more than 120 million barrels above the five-year average.

“The market’s response to the weekly report from the U.S. Department of Energy is clear proof: the current mood is worse than the actual situation,” analysts at Commerzbank AG in Frankfurt including Eugen Weinberg said in a report.

But others remain hopeful of a price recovery.

"The global market remains over-supplied by 1.3 million bpd and a few months do not necessarily make a trend," writes Art Berman of OilPrice.com.

"At the same time, with prices now below $40 per barrel, I am encouraged that there is the potential for progress toward market balance and eventual price recovery."

(Newsmax wire services contributed to this report).

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StreetTalk
Don't expect oil prices to rebound anytime soon, and it's best for investors to prepare for an extended slump, warns Ron Insana, a CNBC and MSNBC contributor.
ron insana, oil, crude, price
428
2015-17-11
Friday, 11 December 2015 05:17 AM
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