Oil production in the U.S. has helped drive down oil prices, but the “Oracle of Oil” doesn’t expect depressed prices to be the new norm.
Oil prices have fallen by roughly 50 percent from highs of $100-plus per barrel, but T. Boone Pickens, speaking at ACT Expo in Dallas Tuesday morning, says as U.S. producers throttle back production, he expects oil prices to recover to upwards of $70 per barrel by the end of this year and approach $90 per barrel by the end of 2016.
“Since 1980, I’ve seen six of these collapses of half the price of oil and I promise you it will be be back up again,” the soon-to-be 87 year old Pickens says.
Pickens says U.S. producers, who at their peak had more than 1,600 rigs drilling for oil, are responsible for the decline in oil prices. But rig counts have been cut by more than half as prices fell.
“We’re the one who over supplied the market and caused it to drop $50 per barrel,” he says.
In comparison, natural gas is trading for around $3 (MMBtu), and wild swings in that market are uncommon and Pickens said, rarely hit the bottom line as hard as swings in oil.
“If natural gas doubled to $6, it would increase your fuel cost 37 cents a gallon,” he says. “$100 oil in parity with natural gas is $16, and I’ve never seen $16.”
“I have said that in my lifetime, I don’t think I’ll ever see $10 natural gas again,” he says, “but I do think we may see $8. I think you’re looking at $100-plus for oil forever.”