A Calgary energy economist says the failure of weekend OPEC meeting has accomplished the goals set out by Saudi Arabia nearly two years ago.
Peter Linder says the Saudis started over-producing in 2014 in a bid to safeguard their share of the market. Linder with record drops in capital spending last year, this year and probably next year, other countries won’t be able to ramp up production when demand does increase again. “We might be heading towards a crisis in supply demand a year or two from now because the money you spend now will result in new production a year, two, three years from now. We’re not seeing that.”
Linder says while production in Canada is increasing as oil sands projects come on stream, production in most countries is now dropping rapidly and he expects the world’s output of oil to reach the demand level within 3 or 4 months. But even when that happens, there’s still a record inventory in storage. “As that inventory starts to get depleted, prices will move up even more. I expect $65 maybe even $70 oil price nine to twelve-months from now.”