likely, says Craig R Smith, CEO, Swiss America
Trading, and author of Black Gold Stranglehold
CNBC-TV18 shares with domain-b
its exclusive interview with Smith.
prices plunged below $52 and fuel use dropped 4 per
cent last week as mild weather curbed heating-oil use.
Craig R Smith, CEO, Swiss America Trading, and author
of Black Gold Stranglehold shares his outlook on where
crude prices are headed.
sees crude at $55-$60 / bbl by March 2007. However,
he says that crude could go to $60-$60 / bbl, if there
is violence in Iran and Nigeria and feels that there
are too many geopolitical risks to keep oil at lower
levels CNBC-TV18 shares with domain-b its exclusive
interview with Smith:
do you see as the few next weeks in terms of how this
market is going to move?
Today I am not as bearish as many in the US are about
the oil market at this moment. I think there are way
too many geopolitical risks still out there that could
easily influence this market on the upside and of course
the one that first comes to mind is the potential of
the recently announced OPEC cuts.
you ever followed OPEC,s logic and its follow through,
they have announced, it takes few months for member
nations to come under compliance. The announced cut
of 1.7-million barrels will be fully implemented by
February 1 and will be very bullish for the market.
factors seem to be loaded against crude, inventory seems
high and demand sluggish. When do you think these equations
will even out?
I think the supply and demand is one issue and obviously
the demand has settled down somewhat with the recent
changes of weather in the largest consumer of oil in
the world that is the United States. But I think that
can be very short-lived from what the forecasters are
saying for the rest of the winter. But I am more concerned
about the supply side from the geopolitical standpoint.
recent events in Iran and the threat that it poses of
potentially causing problems in Straits of Hormuz could
have a very detrimental impact on the prices of oil
to the upside. I think that when you look at the Strait
of Hormuz, 90 per cent of Japan's oil comes from there,
60 per cent of Europe's, about 25.5 per cent of the
you couple that with the problems we are having in Nigeria
with the movement for emancipation of the Niger
Delta and the militants trying to take over oil facilities
there, I just think there are way too many geopolitical
risks that are out there right now to the supply-side
of the equation.
assume that we are going to see oil stay in this $50-$55
trading range is optimistic and I wish I could be like
those who believe that is the case; many are saying
that now the terror premium is out of the oil, which
will see prices settle down.
just think it is being very optimistic given all the
geopolitical events that can unfold with just two headlines
in the newspapers tomorrow.
the upside how much do you see crude recovering by the
next one or two months?
Again it is going to depend on how these events take
place. I am very pessimistic about Iran, which sounds
a little bit reactionary but you got to keep in mind
that Iran has the fourth-largest amount of sea mines
out there next to China.
wouldn't surprise me to see them threaten to mine the
Strait of Hormuz, which could create chaos overnight.
I suspect if even minor events, something not to those
levels occur you will probably see oil between $55-$60
a barrel by March.
we were to see Iran make moves like that or further
escalation of the problems in Nigeria, I think $60-$63
a barrel are very legitimate by the middle to the end
would you call the bottom for crude right now?
I think the equilibrium price depends on who you ask.
Some one believes that it is at $40, while I to believe
it is at $45. I think I can make the case that below
$45 on oil is going to be very difficult to extract;
the oil from some of the new finds, the deep sea drilling
that we have in the Gulf.
today announced cut backs, Hornbeck Marine Services'
stock dropped dramatically today on the whole, potentially
on the news that they are shutting production at these
I must tell you I think the equilibrium price of oil
is $45 a barrel. I don't think you are going to see
that hit and will be very shocked if you did and let
the cuts and all these geopolitical events.
would play this market more on the upside than I would
on the downside.
I am probably a contrarian right now in that area but
I just don't see the geo-political climate settling
down such as to make myself comfortable enough to tell
people to stay short with oil here.