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Wilbur Ross Predicts $35-$40 Oil, No Freeze at June OPEC Meeting

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By    |   Monday, 18 Apr 2016 01:17 PM

Billionaire investor Wilbur Ross predicts oil will linger in the mid-$30s after the Doha summit ended without a deal.

Ross, chairman and CEO of private equity firm WL Ross & Co, told CNBC on Monday that prices would range between $35 and the low $40s in the near future.

The price of oil fell as much as 7 percent after the talks ended but then bounced back. The contract traded in New York was down $1.14, or 2.8 percent, at $39.22 on Monday while the international standard, Brent, fell $1.04, or 2.4 percent, to $42.28, the AP reported.

The cost of oil has fallen in the past two years from above $100 a barrel to touch 12-year lows this year, before picking up in recent weeks.

Ross warned not to count on an agreement by OPEC's (Organization of the Petroleum Exporting Countries) next meeting in June. He said no deal was likely until Iran returned its production to a pre-sanctions level.

"It's been my belief for some time that Iran wouldn't agree to any limits on their production until they're back up to four million barrels a day...In the meantime, I don't see Saudi Arabia cutting their production while Iran keeps building theirs," Ross said. "These talks were doomed for failure," he said.

"But even if you reach a deal on production, the next challenge is enforcement," Ross said.

The deal to freeze oil output by OPEC and non-OPEC producers fell apart on Sunday after Saudi Arabia demanded that Iran join in despite calls on Riyadh to save the agreement and help prop up crude prices, Reuters reported.

"Part of the reason we got to where we did with the Saudi's announcing they weren't going to play any more is because in prior agreements, the only ones who abided by them were the Saudis and they apparently have gotten tired of cutting their production just so other parties can keep theirs up."

Prices were unlikely to return to the $20 level, Ross said, but added that they wouldn't rise significantly above $40 either given the market's persistent problem of high inventories.

The producers had gathered in Qatar, Doha at the weekend for what was expected to be the rubber-stamping of a deal to stabilize output at January levels until October. The deal crumbled when OPEC heavyweight Saudi Arabia demanded Iran join the plan, despite Tehran's repeated assertions it would not.

"The material loss in production from the Kuwait strike has helped the oil market forget about the farce from Doha," Matt Smith, director of commodity research at the New York-headquartered Clipperdata, told Reuters.

Analysts say oil is likely to rise in the longer-term as many companies, particularly in the U.S., scale back output.

The effort to reach a consensus on limiting production to support prices failed after Iran stayed away from a weekend meeting of 18 oil-producing nations in Doha, Qatar. Saudi Arabia said it wouldn't back a deal if regional rival Iran, which is trying to ramp up output as international sanctions are lifted, wasn't involved.

The inability of OPEC countries and Russia to freeze production levels means they will likely continue to pump oil at near-record rates. However, other producers — notably U.S. shale companies — are cutting back on production to cope with the lower prices and some have even gone bust. That has the potential to support prices.

Last week, before the Doha meeting, the U.S. Energy Department and the Paris-based International Energy Agency both reported that U.S. production was declining.

The IEA noted signs that "the much-anticipated slide in production of light, tight, oil in the United States is gathering pace." It added that by early April the rig count in the U.S. had fallen nearly 80 percent from the peak seen in October 2014 and that more anecdotal evidence is emerging of "financial problems taking their toll on the shale pioneers."

(Newsmax wire services contributed to this report).

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Billionaire investor Wilbur Ross predicts oil will linger in the mid-$30s after the Doha summit ended without a deal. The...
Wilbur Ross, oil, crude, opec
Monday, 18 Apr 2016 01:17 PM
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