Energy Analyst: Oil prices to rise substantially

- Rattled to its core by global glut and a consequent free fall in crude prices that have lingered for months, the battered Houston energy industry has been hungry for any kind of good news.

Today it came.

"You are rapidly heading to an undersupplied situation which is what commodity markets do," said Marshall Adkins, head of energy research for Raymond James.

Adkins and his analysts have detected a fierce spike in global consumption driven by low prices at the pump.

"Gasoline demand in 2015 was the highest we've seen in decades," said Adkins.

With many American oil producers driven to the sideline by low crude prices, Adkins says big Middle East suppliers won't be able to pump enough to keep up with growing global appetite.

"We think they are at max capacity," said Adkins.

His Bottom line - light at the end the tunnel with oil prices rising substantially by the end of the year and relief for those in the American oil patch who've managed to stay afloat.

"Things are going to suck for another six months. It's not good out there, but this business, I think, has an incredibly bright future once we get past the next six months," said Adkins who is forecasting solid pricing for two plus years after the fourth quarter correction begins.

Energy analyst Edward Hirs teaches at the University of Houston and believes Adkins forecast is overly optimistic given the sheer size of the oil glut and the on-going commitment of Middle East producers to knock out American competition.

"I don't see it happening. The US producers got into a price war with folks who could afford to do a price war and this is a very difficult time for them," said Hirs who points to a 40 percent increase in oil production by Russia as evidence petroleum scarcity is unlikely in the near term.

Hirs and Adkins fully agree that price relief for producers could occur a good deal quicker if hostilities erupt in the Middle East that threaten the flow of crude from the region.

Both contend the disruption could double or triple oil prices overnight.

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