One on One with John Kilduff, Energy Analyst, at Fimat
Thursday, February 15, 2007
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SUSIE GHARIB: A volatile day of trading in the oil markets on forecasts of warmer weather in the eastern part of the country. By the close of trading in New York, March crude futures closed at $57.99 a barrel, off just a penny. They were down more than a dollar earlier in the day. Joining us now for more analysis of the energy markets, John Kilduff, energy analyst at Fimat USA. Hi, John.
JOHN KILDUFF, ENERGY ANALYST, FIMAT USA: Good evening, Susie.
GHARIB: You know, we've seen oil prices dropping this week. What's behind the drop?
KILDUFF: Basically it's the tug, the tug of demand that seems to be declining in the face of weather forecasts that are telling us that it's not going to remain this bitterly cold into March whatsoever. And basically a well supplied market that we continue to see really robust gasoline supplies, and even the demand that, for winter fuels was not as fearful to the market as the market -- as was considering.
GHARIB: What's your forecast on crude prices? Do you see them settling below $50 any time soon?
KILDUFF: Well, right now we're in a pretty well defined range between 50 and 60. To get up above 60 we're going to need some help on the geopolitical front in particular. But yes, we're heading into what's basically we call the slack demand season where we are not quite into the peak summer driving season and we are cycling out of winter. So as inventories build during this time period, as crude oil inventories are able to replenish, as refiners do their maintenance, I do expect crude oil prices to fall down towards the lower 50s rapidly over the coming weeks.
GHARIB: You mentioned geopolitical risks. What are the risks for crude prices to head right back up?
KILDUFF: Well, obviously the big one right now is the situation with Iran and their nuclear ambitions. Next week we have a report in front of the UN about the status there. And also certainly you can make the argument that the administration's talk right now is reflective of anti- bellum Iraq three years ago. Clearly that would be the trigger point, the first bomb or incident between the two countries would send oil prices flying higher, well above $80 a barrel, upwards of a hundred depending on the circumstances. That's the big worry and Iraq as well Susie.
GHARIB: Nobody wants to see $100 a barrel oil. OPEC meets on March 15th. Are you expecting any actions at that meeting that could impact prices?
KILDUFF: It would be completely price-driven, not necessarily policy driven. They won't necessarily care what global inventories look like even though they'll talk about that. The backdrop will be price. If we're down towards $50 a barrel or lower, there will be another production cut lead by Saudi Arabia. If not, if we're right around here, 58, 60, you will see the Saudis in particular lead the charge to keep the status quo in place.
GHARIB: We're running right out of time. So I just want to ask you a real quick question about gasoline prices. They've also been coming down. Can consumers expect a break in prices at the pump?
KILDUFF: They absolutely should, Susie. We're in our best position in a long time regarding the available supplies going into the spring season here. The slow winter gave refiners a chance to make extra gasoline, basically so we should be well supplied going into the peak summer driving season.
GHARIB: That's good news for consumers. Thank you so much, John, for coming on the program this evening. We've been speaking with John Kilduff, energy analyst at Fimat USA.
