Follow-Up To That RBN Guest Editorial Earlier This Morning -- March 2, 2015

Earlier I posted a link to a guest editorial over at RBN Energy.

I have read that editorial several times now and shared my thoughts with a couple of other readers. I am unable to follow the logic of that writer at the link. I will write more on this later, perhaps. The writer at the link suggests OPEC is willing and able to keep prices of crude oil low for a very long time.

A reader did a bit of research that I should have done. The reader found this story. Back on July 16, 2009, Bloomberg published a piece in which that same writer predicted the price of oil would plummet to $20:

Crude oil will collapse to $20 a barrel this year as the recession takes a deeper toll on fuel demand, according to academic and former U.S. government adviser Philip Verleger.

A crude surplus of 100 million barrels will accumulate by the end of the year, straining global storage capacity and sending prices to a seven-year low, said Verleger, who correctly predicted in 2007 that prices were set to exceed $100.

Supply is outpacing demand by about 1 million barrels a day, he said.

“The economic situation is not getting better,” Verleger, 64, a professor at the University of Calgary and head of consultant PKVerleger LLC, said in a telephone interview yesterday. “Global refinery runs are going to be much lower in the fall. If the recession continues and it’s a warm winter, it’s going to be devastating.”

Crude oil last traded at $20 a barrel in February 2002. Futures were at $61.18 today in New York, having recovered 89 percent from a four-year low reached last December. The Organization of Petroleum Exporting Countries is implementing record supply cuts announced last year in response to plunging consumption.

“OPEC don’t realize the magnitude of the cuts they need to make,” which would total about a further 2 million barrels a day, Verleger added. “Storage is going to become tight. It’s not clear if there’s going to be enough storage available.”

It almost sounds as if he was about six years early in his predictions. What he said then (in 2009) sounds very familiar to what is happening today -- except for the fact that when OPEC maintained production -- on purpose -- the price of oil plummeted almost 50%.

So, how did that July 16, 2009, prediction work out? Note the spot price of WTI for the next few months after that date, source: EIA:

As noted often, trying to predict the price of oil is a fool's errand.