Oil Price Forecast for 2018

[dan_s]

Bloomberg: Oil Prices in 2018: Once Again Its All About U.S. Shale Output.

The direction of oil prices in 2018 will be decided in Texas. Crude oil production out of the U.S. is expected to hit record levels next year, buoyed in part by OPEC supply curbs that have put a floor under prices. For analysts forecasting prices next year, there are two key questions: exactly how far American production grows and whether the global economy is strong enough to swallow those extra barrels? Brent crude is expected to average $60 a barrel in 2018, while its U.S. counterpart is seen at about $55 a barrel, according to the median estimate of 27 analysts surveyed by Bloomberg. That’s below where oil prices sit now -- currently near $64 a barrel for Brent and close to $58 for West Texas Intermediate. Around those averages forecasts vary considerably -- ABN Amro Bank NV is ultra-bullish while Citigroup Inc. and BNP Paribas fall on the more bearish end of the spectrum. “A lot of the divergence that you’ll find between the analysts that do their balances really pertains to this U.S. production growth figure,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, who forecasts Brent will average $55 a barrel in 2018. “We are very optimistic on U.S. shale supply growth next year and this optimism is essentially fueled by the extensive hedging that occurred in 2017 for 2018.”
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Keep in mind that Wall Street firms tend to be conservative in the commodity price decks that they use to value companies.

I am still assuming WTI averages $50 in all of my forecast/valuation models, so if I take that up to $55 all of the valuations will go up. Of course my use of $3.00 for Henry Hub gas may need to be lowered. No one ever talks about NGL prices, but they are going up even faster than the oil price.

In January each year I roll all of my forecast models out another year and I will be breaking out 2018 by quarter. It is a big job.