PIRA hosted a seminar in New York in October where Saudi officials hinted they would change their oil policy. OPEC’s biggest oil-exporting nation announced weeks later that it would maintain production to defend market share, sending prices plunging.

“There’s not spare capacity to speak of instantly available,” Ross said. There are also growing geopolitical threats to supply, including from Islamic State, he said.

Demand Gains

PIRA forecasts a jump in global oil demand of about 1.7 million barrels a day this year and a similar gain in 2016. That beats the 10-year average increase of about 1 million barrels a day and exceeds predictions from other analysts and oil companies.

Consumption will be strong in industrialized economies such as the U.S., Europe and Japan, where fuel demand has swung to expansion from contraction, according to Ross.

Supplies from most nations outside the Organization of Petroleum Exporting Countries will contract next year for the first time since 2008. While output in North America will increase, production from Australia, the North Sea, Colombia and Argentina will decline, according to PIRA.

Even higher exports from Iran following the landmark July 14 accord to ease sanctions may do little to check oil’s advance, Ross said. The increase may be limited to less than 500,000 barrels a day over six months and the country will struggle to sell its condensate stockpiled on tankers, he said.

Hedge funds and other speculators, having cut bullish bets on WTI crude to the lowest level since March, may be ready to start buying again as low prices cause the market to tighten. “We are approaching selling exhaustion,” Ross said. “The magic of prices works.”