Despite the relentless pullback in energy prices, billionaire T. Boone Pickens is holding firm on his $70.00 price target for crude oil. Prices are currently hovering between $52.00 and $54.00, reflecting a 44% decrease over the last 12 months. (Source: CNBC, July 10, 2015.)
Pickens’ comments come in a week where U.S. oil production dropped by 50,000 barrels. The lower price has forced 1,012 oil rigs out of business in the last year. However, many analysts are estimating that a deal between Iran and the United States will draw one million barrels of Iranian oil into an already crowded market.
The oil genius brushed aside concerns of excess supply in the event of an Iran deal. “As far as the oil is concerned, Iranian oil won’t come onto the market till next year,” said Mr. Pickens. “And it will come on closer to 200,000 barrels a day than it will to a million barrels a day.”
Brent crude was last down 8.62% at $58.67 on Friday, nine days after the initial deadline for an Iran deal. U.S. crude futures slid 12% in the same timeframe. (Source: The Wall Street Journal, July 10, 2015.)
According to Pickens, lower crude prices have hamstrung global production, squeezing supply enough to warrant a price increase later this year. He said that world output is 93 million barrels, with nine million coming from the U.S. and 30 million barrels from OPEC.
Russia and other countries contribute 50 million barrels, which Pickens argues will decline by five percent this year. He suggested that Iraq’s oil production has peaked at 4.4 million barrels, virtually guaranteeing a tightened supply of oil.
“As you go forward from here, declines will happen and U.S. production will go down.”
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