Oilman Harold Hamm said Monday the oil market will recover in 2016 as supply and demand come into balance.
“We’ve seen tremendous growth in the market for our supply. It’s up about 3 percent on an annual basis, so it’s quickly correcting,” theContinental Resources chairman and CEO told CNBC’s “Squawk Box.””2016 will be the year for correction, and we estimate the first half.”
Once market watchers see the supply and demand lines cross, prices will begin to recover, he added.
Global oil markets are estimated to be oversupplied by about 1.5 million barrels of crude a day. Commodity prices have plummeted from highs above $100 per barrel amid a rout that accelerated after OPEC decided to forgo production caps in November 2014.
Globally traded Brent crude oil fell Monday to its lowest level since July 2014, breaking below the $36.20 price level hit during the depths of the financial crisis. U.S. crude threatened to fall below $34.
Hamm said the industry does not necessarily need oil prices to return to $100 per barrel, thanks to efficiency gains in the U.S. oil patch. Drillers have lowered the cost of extracting hydrocarbons from shale rock through a process known as horizontal drilling.
Hamm said the price of oil will return to $40 to $50 in the first half of 2015. He also expects the gap between Brent and U.S. crude to narrow following the lifting last week of a 40-year-old ban on exporting crude oil from the United States.
Allowing producers to export U.S. crude will help the product find a market in countries with refineries capable of processing it, Hamm said, noting that foreign acquisition of U.S. refineries has reduced capacity for American oil.
Vagit Alekperov, CEO of Russian oil giant Lukoil, told CNBC on Monday the oil market will be able to sustain $40 to $50 per barrel next year.
“The current purchases taking place in the industry do not incentivize the development of new exploration projects. … The volumes of oil output will be going down, and as a result, its price will be climbing back, but that will happen during the mid term,” he said through an interpreter.