The "new normal" for U.S. oil prices could be as much as double the current $40 per barrel, but don't expect $65 to $80 crude until around 2018, long-time industry advisor Tom Petrie said Wednesday.
"We overshot on the downside, when we penetrated $30 [per barrel]," Petrie said, referring to the Feb. 11 bottom of $26.05 per barrel. Since then, WTI has surged about 45 percent. "Some of that recovery, shock though it was, was getting back into a more normal adjusted price."
"We're going to … [see] enough of a decline in North America and China and other non-OPEC sources, where by this time next year, most of the surplus if not all will be eliminated. But we still then need to pull down those inventories," said Petrie, formerly a vice chairman of Bank of America Merrill Lynch.
Since the June 2014 highs of around $114, massive global oversupply and slowing demand have slammed crude by about 60 percent. The collapse has not only hurt U.S. producers, it's put heavy pressure on the oil-rich nation of Saudi Arabia.
In these drastic times, the Saudis are close to securing a $10 billion, five-year bank loan — the government's first significant foreign borrowing for over a decade — as the world's top oil exporter seeks to fill a record budget gap.
"A lot of this is the theater of it. Ten billion [dollars] doesn't really close the gap. Their numbers would say $100 billion of deficit. But it does signal, 'look if you want to try to outlast us, you're going to find it difficult," said Petrie, who during his career has advised on more than $250 billion of energy-related mergers and acquisitions.
The kingdom last week also confirmed plans to sell a stake in its state-owned oil giant Saudi Aramco.
Against that backdrop, President Barack Obama arrived in Saudi Arabia on Wednesday for a meeting with King Salman, just days the Saudis and other OPEC and non-OPEC exporters failed to reach an agreement to freeze crude production.