OPEC and Russia deal will prevent US shale coming back online: RBC’S Croft

A China scare is a headwind for oil: Expert

Russia and Middle Eastern oil producers want to keep oil prices between $50 and $60 per barrel, according to the head of commodities at RBC Capital Markets, who suggested that U.S. supply is the real problem for the oil cartel.

Supported by a drop in U.S. fuel inventories, oil climbed further above $52 per barrel Friday amid plans from OPEC producers for a supply freeze agreement to help stabilize prices.

"I think that Saudi Arabia, OPEC and the Russians hope that yes some U.S. production will come back but $50 to $60 is probably not enough to resurrect the entire U.S. shale complex," Helima Croft, managing director and global head of commodity strategy at RBC Capital Markets, told CNBC Friday.

"I don't think they are aiming for $70 to $80, because I don't think they want to bring it all back," she said. Croft added that Russia and the Middle East want a "steady grind higher, not a gallop" in terms of prices.

In their most recent note RBC capital markets see WTI and Brent averaging $51 per barrel and $53 per barrel over the rest of 2016, before increasing to $56.50 per barrel and $59 per barrel on average in 2017.

15th International Energy Forum (IEF15) informal meeting of the Organization of Petroleum Exporting Countries (OPEC) in the nation palaces bread club.
Billal Bensalem | NurPhoto | Getty Images

November's OPEC meeting is seen as the forum where a supply freeze deal will stand or fall. RBC's Croft said it will be down to Saudi Arabia whether anything meaningful is achieved.

"Almost all these other countries are basically maxed out and really it will have to be the Saudi's and the GCC (Gulf Cooperation Council) who takes the cut," she told CNBC.

"If the Saudi's incentivize the deal, I think it gets done," she said.

And on fears that Libya will ramp up supply to previous levels, Croft said political turmoil in the country would prevent that happening.

"Libya has three governments at the moment; there are 100 militias in Tripoli," she said. "The country is awash with weapons. It's like asking Somalia to get their act together."