Oil is going to $150 says the cover article in the latest edition of Barron’s.
Despite the recent selloff, and the mediocre global economic recovery, author Gene Epstein lays out a pretty straightforward case of supply and demand, with the former being the most important part of the equation.
As the IEA just told us, spare capacity is tight in OPEC countries, and non-existent in non-OPEC countries.
Presuming even moderate global GDP growth means that we’re about to see record tightness.
The article also cites the work of Morgan Stanley commodity strategist Hussein Alidinan who has done work on tight oil supplies. In a recent strategy deck he presented this chart on the inevitable drawdown of oil inventories placing pressure on OPEC to pump more.
You can see a larger version of the chart on this old post.
Photo: Morgan Stanley
Allidina only sees oil going to $140, but regardless the message, that record tightness is on the way, regardless of economic growth, seems to be the gist of the oil bull case.