Former Royal Dutch Shell President: Won't Be Surprised To See Crude Bottom Out Now And Starting To Go Up In Late Spring

Crude took a big cut on Friday following the release of the December Jobs data. Although it continues to trade below $50 and make new lows, some experts are predicting this to be the bottom.

John Hofmeister, former U.S. president of Royal Dutch Shell plc (ADR) (NYSE: RDS.A) and founder of Citizens for Affordable Energy, was on Bloomberg to discuss outlook for oil production and crude prices.

 “We get here because traders do a good job of looking for buyers of inexpensive molecules and they can still find sellers,” Hofmeister said. At some point they will run out of sellers at this price and then we have to reassess where are we in terms of supply demand equilibrium and I wouldn’t be surprised to see this, well first of all I call this an anomaly in terms of oil price, but I wouldn’t be surprised to see it bottoming out right in this time frame and starting to go up again late in spring.”

Is It All Traders’ Fault, Doesn’t Lack Of Demand Plays A Role?

“Well that’s what created the disequilibrium, Hofmeister replied. So, we have slowing demand in China, Russia is in real trouble, US is in recession, for all practical purposes, Brazil and other parts of the world aren’t growing the demand the way the production side was anticipating. So, that’s created a short-term over surplus of oil, but it’s only above 1% a day and then when it’s that small it doesn’t take long for it to disappear.”

He continued, “For example, the three million barrel shrinkage in storage in the US is a couple of hours worth of US consumption and so the volumes are huge here. 91 million barrels a day, 1p over means we are getting demand around 90 million barrels a day…and it doesn’t take much to wipe out this anomaly.”