- Bloomberg TV
Gary Shilling has re-upped his bold forecast for oil to fall to $10 a barrel.
OPEC oil cartel members and nonmembers, who collectively pump out about half the world’s oil, met in Doha, Qatar, on Sunday to try to agree on production limits. The aim was to provide a boost to oil prices.
However, it all ended without an agreement, in part because Saudi Arabia was not willing to sign anything without Iran on board.
Shilling first made this call in an op-ed published more than a year ago.
And right after the failed producers’ meeting in Doha on Sunday, Shilling thought he’d remind us of where he sees oil going.
— A. Gary Shilling (@agaryshilling) April 17, 2016
Right after the futures market opened on Sunday, West Texas Intermediate crude fell nearly 7% to about $37.61 a barrel. Prices recovered a bit on Monday.
Shilling explained his reasoning for this forecast in Business Insider’s latest “most important charts” feature.
He sent us a plot of OPEC versus non-OPEC production, which showed that non-OPEC countries have outpaced OPEC for at least the past two decades.
The idea is that after US shale producers started to threaten OPEC’s market share, the cartel, led by Saudi Arabia, went all out to boost production and see who could withstand cheap oil the longest.
His thesis is that the price that becomes completely unbearable is $10, which is the marginal cost of oil, or what it takes to produce one extra barrel.
- Business Insider, Gary Shilling