Why Oil May Have Truly Bottomed

While oil continues to trade in the $40 – $50 range, there are some occurrences which lead to think oil prices could be climbing.

The number of deals being done in the Permian Basin is almost non-stop. In our Facts & Rumors Newsletter we have been reporting one or two deals for the last few weeks. The money following into these deals makes me wonder that someone knows something most of us do not.
In the Wall Street Journal today, there was an article that China’s oil production has peaked and is slowing declining. There will be greater dependence by China on foreign producers. The expanded Panama Canal now enables super tankers from the U.S. to travel to China much faster.

Iran’s oil production has peaked. Again, a story in the Wall Street Journal describes how Iranian oil production peaked in May. Monthly oil production will not increase because lack of foreign investment in Iran’s oil and gas infrastructure and the sanctions. Many of the sanctions placed on Iran have made it very difficult for it to trade with European companies. Europe was the primary destination for Iranian oil prior to the imposition of the 2012 sanctions.
With Iran’s production plateauing, many think the Saudi’s will agree to a production freeze because of Iran’s weakened position.

Some analysts and oil company executives are calling for $60 oil by the end of the year. It may happen.