Oil to remain capped at $50
Published on 05.09.2017 15:35

The oil price is making another run for the $50 mark today over concerns about the damage that Hurricane Harvey has caused, but below it will struggle to break through this level as the disruption to supply is not as bad as first thought

RBC global head of commodity strategy Helima Croft noted that in the past, natural disasters like hurricanes had a bigger effect on the supply of oil as a larger portion of production came from the Gulf of Mexico

The amount of oil production now coming from the gulf is around 15 percent, well down from an earlier figure of 30 percent on the back of different production methods such as shale oil production,

"We think the developments for crude still look pretty bearish because of how many barrels are simply backing up with these refineries being offline," Croft said

"That's probably going to sort of cap whether or not WTI can break through $50 for a while, barring any sort of major outside catalysts." She added.

At around $50 a barrel, the big oil production companies won’t be too concerned said analysts at Goldman Sachs because at this price, oil is more profitable than it was at $100 due to reduced drilling costs and lower overheads,

“Simplification, standardization and deflation are repositioning the oil industry for better profitability and cash generation in the current environment than in 2013-14 when the oil price was above $100 a barrel,” they said

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Andrew Masters

Analyst

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