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OPEC Secretary General al-Badri says oil prices may have found the floor, but warns of future spikes

Abdulla al-Badri, Secretary General of OPEC, thinks oil prices have reached their bottom and may start rising soon. He warned that under-investment now could lead to future supply shortages and bring the price of oil to $200 per barrel.

“Now the prices are around $45 to $50 and I think maybe they reached the bottom and will see some rebound very soon,” said al-Badri in an interview with Reuters. The OPEC Secretary General continued to defend the cartel’s decision to maintain production in November, saying that cutting volumes would have led to excess production capacity, a lack of investment and an eventual shortage and price spike that could exceed the one seen in 2008, when prices peaked at $147 barrel.

“Suppose we cut production, and then we’ll have spare capacity,” he said. “Producers, when they have excess capacity, they will not invest. If they do not invest there will be no more supply, if there is no more supply there will be shortage in the market after three to four years and the price will go up and we’ll see a repetition of 2008,” he said. “Maybe we will go to $200 if there is a real shortage of supply because of the lack of investment.”

Others think that prices may never reach $100 again

Not everyone agrees with al-Badri about the potential for oil prices reaching the triple digits, much less all the way up to the $200 per barrel mark. Saudi Prince Alwaleed bin Talal al-Saud, Saudi business magnate and investor, said that he thinks prices will remain below $100 indefinitely.

When asked about oil prices Prince Alwaleed said, “I’m sure we’re never going to see $100 anymore,” in an interview with USA Today, earlier this month. The Saudi prince said that prices above $100 per barrel are “artificial,” and will not reach such levels again.

Regardless of whether or not Prince Alwaleed is correct, the market reacted positively to the bullish comment from al-Badri. U.S. oil for March delivery rose as high as $46.11 per barrel, up from $45 earlier in the day, reports The Wall Street Journal.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.