Oil Rebound Not Sustainable With Current Supply and Demand Imbalances

NEW YORK (TheStreet) -- Oil prices have been climbing in recent weeks on the surprise victory of President-elect Donald Trump and on hopes that OPEC will be able to come to an agreement at its Nov. 30 meeting regarding a cap on production.

For more than two years, the oil market has been saturated with an excess of supply, and OPEC has in the past remained firm in its refusal not to cut production in order to protect market share.

"I think that there are some legs to the rebound that we've seen since February of this year. But I have trouble seeing how oil can really push above $50 a barrel sustainably without the supply and demand imbalances, which fundamentally drove the initial selloff, really being corrected," JPMorgan Asset Management Global Market Strategist David Lebovitz said on Bloomberg Daybreak: Americas on Friday morning.

Lebovitz continued by driving home the issue of excess supply. Any time oil prices rise over $50 per barrel, shale producers begin pumping again, and supply weighs on prices again.

BloombergTV's Jonathan Ferro questioned Lebovitz about U.S. shale producers' competitiveness and about the significance of the efficiencies producers have found over the last couple of years.

"I think the efficiencies and the technological progress is significant, and I would say that the companies that are left are pretty solid companies," he responded. "We've seen a shakeout in the energy industry and I think that the key players that are left can be profitable going forward."

Lebovitz believes the companies that have been able to be profitable with oil at its current prices are going to be a viable source of growth for the economy.

As for President-elect Trump, BloombergTV's David Westin questioned Lebovitz as to how much of the recent rally is due to anticipation about what the next president will do.

"I think that 'anticipation' is the key word," Lebovitz responded. "There is still a lot of uncertainty out there. We don't know what the policy prescriptions that actually take hold are going to look like."

Lebovitz wouldn't be shocked to see stocks and yields "take a pause" and process some of the recent information to try to figure out what a Trump presidency will mean.

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