Tags: Su | shale | oil | 75

Analyst Su: Shale Boom Will Send Crude Oil to $75 by Q2

Thursday, 14 Mar 2013 08:10 AM

By Dan Weil

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Crude oil prices will plunge to $75 a barrel by the end of the second quarter amid mushrooming production of shale oil, says Andrew Su, CEO of Australian commodities brokerage firm Compass Global Markets.

That would represent a 19 percent drop from Wednesday morning’s price of $92.95 for April crude contracts on the Nymex. And Su thinks oil could keep sliding in the second half of the year.

"Shale oil is the reason why oil prices fell last year and the reason why it will continue to fall in the next few years," Su tells CNBC.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

Crude prices dipped 7 percent last year.

"Shale oil will reshape the way that the entire oil industry is run, and the U.S. will become an exporter of oil in the next five to 10 years,” Su says. “That will have a significant impact on the U.S. and the global economy."

Meanwhile, sluggish economies around the world are curbing oil consumption. That too will weigh down oil prices, Su says.

"Global crude oil consumption is falling to new lows, particularly in the U.S. This is because crude oil is used to produce gasoline, and we are seeing a growing trend away from gasoline-fueled vehicles toward hybrid vehicles," he explains.

U.S. oil demand fell to its lowest level in 16 years in 2012, CNBC reports.

"We could see a bigger and more violent reaction [in commodity prices] if equities continue to go higher and investors start to shift assets around more. That's what makes us concerned about what's happening with the equity markets and the impact on commodities," Su adds.

The Organization for Economic Co-operation and Development (OECD) has a forecast diametrically opposed to Su’s — for the long term anyway.

It sees Brent crude oil gaining to anywhere between $150 and $270 by 2020 amid surging demand in emerging markets. Brent traded at $109.65 Tuesday.

"I think people have been calmer about oil prices given the new supply, but if you really look at the implications of rising demand, you see this isn't true," says Isabelle Koske, an OECD economist, The Wall Street Journal reports.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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