By Velda Addison, Hart Energy
Analysts speaking at a recent energy conference might have given Houston-area gamblers, hoping for a payout of $7,000 worth of free furniture, reason not to place their bets just yet.
Gallery Furniture, owned by Jim “Mattress Mack” McIngvale, says its “85 and It’s Free!” promotion is still underway. As part of the special promotion, similar to others offered in the past by Mattress Mack, customers who purchase $7,000 worth of furniture can get their money back if the price of a barrel of West Texas Intermediate (WTI) crude hits $85 before year-end. Read more about the promotion here.
The barrel’s bounce back from lows of about $50 last year to about $60 today might have been enough to give shoppers confidence, with more than six months left to gain $25.
But there are reasons why the oil market is called volatile.
Not even analysts on stage during Mayer Brown’s Global Energy Conference on May 13 were on the same page when a moderator asked for their thoughts on where oil prices were heading.
Here is what they had to say:
- John Gerdes, managing director and head of research at KLR: Oil price will be predicated predominately on cost of supply. His outlook: Oil prices will return to an $80/bbl environment next year and possibly $100/bbl (Brent) and $90/bbl (WTI) the following year.
- Pearce Hammond, managing director and co-head of E&P research at Simmons & Co. International: “The oil service companies have cut costs so much that the producers right now are talking about going back to work at a lower price at about $65/bbl,” he said. His outlook: WTI will climb to $65/bbl in 2016, with Brent trading higher. In 2017, WTI could rise to about $67/bbl.
- James West, senior managing director and research analyst for Evercore Group, said production will roll over significantly and focus should be on international markets. He sees capex falling, but oil prices rising to between $75 and $80/bbl (Brent) by year-end 2015.
Their forecasts varied. It is important to note, however, that no one predicted $85/bbl for either Brent or WTI by the end of this year.
Each had their own explanation for their forecasts, just like others with skin in the game. But only time will tell whose crystal ball was the least cloudy.
Too bad the industry can’t tap technology like predictive analytics to help remove some of the volatility. Unfortunately, that probably wouldn’t even be able to help tame emotional and political wildcards that send the oil market into frequent frenzies.
At this point, it looks like the odds are in Mattress Mack’s favor.
Contact the author, Velda Addison, at email@example.com.
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