ABN AMRO: Oil Can Easily Retest $30; Increased U.S. Production Is Offsetting OPEC Cuts

In a Bloomberg interview, Hans Van Cleef, ABN Amro’s senior energy economist, said crude is at grave risk of mcplunging down to $30. He said the chicanery taking place at OPEC can’t last forever and that US production has soared by 500,000 barrels per day since prices have recovered.

The OPEC-Russian agreement lasts until July, then it’s unknown what will happen to worldwide supplies, which are being buoyed by increased production in Nigeria, Libya and also Iran.

“If they don’t continue with this trend, then the oil price could drop back to where it was two years ago,” Hans van Cleef, ABN Amro’s senior energy economist, said in an interview with Bloomberg’s Oil Buyer’s Guide, adding he’s unsure whether the deal to restrict supplies will persist. “Oil prices could easily go back to the low $30s.”

Van Cleef said his view is that the “downside risk has become much bigger than previously,” with signs that the market had already priced in the production cuts. With compliance at about 90 percent — a historically high level — “we don’t see any upside from OPEC anymore,” he said. “What we do see is more risk of higher production in the U.S., we see a rise in inventories.”

I’m not so sure about this call. The collapse of 2015-2016 was predicated on a weakening China. Supply has been plentiful for years and inventories exceedingly high. The only way crude gets back to $30 is for a full blown panic to strike at the heart of Beijing’s ficticious economy.

God willing, crude will find its way back to $30 in short order, after I’ve sold all of my stocks of course.