$50 oil the new norm with end in sight for protracted rout, says top analyst

One of the most protracted oil slumps in three decades will slowly dissipate in the coming months as leading producers quietly discuss ways to increase prices, says one of the industry's leading prophets.

Gary Ross is the founder and executive chairman with PIRA Energy Group, a New York-based consultancy firm specializing in energy markets.

• Oil price powers higher on hopes OPEC has had enough cheap crude

He believes oil prices are likely to even out at US $50 a barrel by the end of 2016, from a low of sub-$30 in recent weeks.

Ross gave that assessment in an interview with the Reuters news agency.

He explained that members of OPEC — Organization of the Petroleum Exporting Countries — are beginning to talk about a new price balance of $50.

"This is going to become the new anchor for global oil prices," Ross told Reuters.

Advisor to N.L. government

Ross is one of the industry's leading forecasters, and his company has advised the government of Newfoundland and Labrador on energy markets and policy issues in the past.

He said $50 may not be an official target, but OPEC member countries such as Saudi Arabia are "trying to give the market an anchor."

If this occurs, it would mean a dramatic shift from a recent strategy by OPEC to keep pumping and drive down prices in order to hurt higher-cost producers.

This strategy resulted in prices plummeting from a high of $105 in mid-2014 and severely punishing oil producing regions, including Newfoundland and Labrador, where the fiscal situation is dire because of the loss of oil revenues.

Ross was travelling Monday and not available for an interview with CBC News.

But Memorial University economics professor Wade Locke said a gradual bump in oil prices is to be expected.

Demand will outstrip supply

There may be a surplus right now, but Locke said that's expected to change by 2017, according to a report by the International Energy Agency.

"It's always been the case that at some point, demand would start to swamp supply," said Locke.

However, Locke said $50 oil is not enough to grow the province's offshore industry beyond the current size of three producing fields and a fourth, Hebron, coming onstream in late 2017.

"It is a start and now that prices will start to rise, you'll see an incentive for more production like offshore Newfoundland and Labrador. And prices will have to go up," said Locke.

"At some point in time demand will significantly exceed supply and prices will have to rise well beyond $50 as well. But again that's only a matter of time, and a matter of exactly when."

The unprecedented volatility is forcing people like Locke to take a cautious approach to predicting oil prices.

"I was one of the guys suggesting to government a couple of years ago use $105 (a barrel in preparing a budget). I don't have any pretension that anything I say with respect to oil prices has much in the way of precision," he said.