One Investor’s Take On Why Oil Will Rise To US$70

Fear is in the air for the oil and gas industry.

Keppel Corporation Limited (SGX: BN4), one of the world’s largest builders of oil rigs, has cut its Offshore & Marine business division’s direct headcount by 30% since the start of 2015. Meanwhile, its profit in the third-quarter of this year had fallen by 38%.

But, not every market commentator or investor is pessimistic about oil. Take Marc Faber for instance. Faber, the publisher of the Gloom, Boom & Doom report, has a nickname called Dr. Doom because he has been forecasting a market crash for many years.

In a recent interview with CNBC, he shared reasons for why he believes oil prices will rise to US$70 soon. One is a pressing need for infrastructure development in Asia; another is that developed markets would soon boost spending. He expects oil prices to rise from their current level of around US$50 per barrel to US$70 soon.

Faber’s view is somewhat shared by the World Bank, which recently raised its estimate for oil prices in 2017 to US$55 per barrel from US$53.

The World Bank thinks that the Organization of Petroleum Exporting Countries (OPEC) will follow through on its oil production cuts and thus bring down global supply. But then again, nothing is for sure as the World Bank noted the uncertainties around the actual implementation of the cuts.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Ong Kai Kiat doesn't own shares in any companies mentioned.