Oil likely to be in $40-$60 range: Roberto Aguilera, Curtin University

In a chat with ET Now, Roberto Aguilera, Curtin University, says oil price will range something between $40 and $60 a barrel because supply has exceeded expectations and will continue to do so. Edited excerpts

ET Now: We were just speaking to Jonathan Barratt and he believes that if Iran is on board with regards to the oil production caps, then that could be a very key determinant of what oil does in the near term. It looks like the market right now is hoping for a cut and if that does not come, then it will fail to cheer the market. What would be your thoughts?

Roberto Aguilera: First off all, it is a big question whether Iran would be willing to agree to that type of arrangement. In the past, they signalled that it would not be fair for them. They are still producing at a level well below that of pre-sanctioned levels. So the agreement is unfair for them. But in any case, any action that might be taken would possibly raise prices. However, that would then again encourage non-OPEC supply in particular from the Shale sector which I believe can come back pretty quickly even with minimal rise in prices. The result of that would be greater output and then lower prices once again.

ET Now: Where do you think crude prices will settle for the year? What is the new normal for crude?

Roberto Aguilera: The new normal for this year and several years are quite low. My range is something between $40 and $60 a barrel because supply has exceeded expectations and will continue to do so. On the other hand, demand is quite suppressed, part of the reason being Asia and in particular, China, is trying to transition to a less materials and energy intensive mode. But on the other hand, lower oil prices do spur demand growth and that will provide some support for prices. So they could pick up a bit but it is low for several years I believe.