Oil Price Forecast - August 19
Posted: Mon Aug 19, 2019 4:08 pm
This is cut from a long article in Barron's. If you want to read the whole article, send me an email: dmsteffens@comcast.net
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One contrarian who is bullish on the oil market is Michael Rothman, a veteran commodities analyst who runs Cornerstone Analytics. He believes that the global oil market will tighten further. Inventories will be drawn down in the coming months, and Brent crude—the international benchmark now around $58 a barrel—could hit $90 by year's end, he says.
"Many market watchers want to assume that OPEC has almost three million barrels a day of spare capacity, but it doesn't," Rothman says. "And demand, up until very recently, has been more robust than most realize." He estimates that the Organization of the Petroleum Exporting Countries' spare capacity is just over one million barrels a day—a fraction of the 100 million barrels in global demand a day. U.S. oil-production growth, meanwhile, has slowed.
Exxon Mobil anticipates that oil demand will continue to rise for the next two decades, an estimate supported by consumption trends, population growth, and rising living standards in the developing world (more cars and air conditioners). Chevron, which has a similar forecast, estimates that the industry will have to spend $10 trillion through 2040 to replace oil reserves and meet demand.
Rothman's view is that oil demand, which is dominated by transportation, will stay steady despite price moves. "Oil demand has contracted only twice in the past 35 years," he says, noting that the biggest decline, during the 2009 downturn, was only about 1% globally.
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As I have been telling you for months in my podcasts, the assumption that OPEC has several million barrels of additional production capacity is TOTALLY WRONG. Plus, most of the additional production capacity is in Saudi Arabia and they aren't going to do anything to lower oil prices since (a) they NEED Brent over $80/bbl and (b) they went to IPO Aramco at a much higher oil price in 2020.- Dan
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One contrarian who is bullish on the oil market is Michael Rothman, a veteran commodities analyst who runs Cornerstone Analytics. He believes that the global oil market will tighten further. Inventories will be drawn down in the coming months, and Brent crude—the international benchmark now around $58 a barrel—could hit $90 by year's end, he says.
"Many market watchers want to assume that OPEC has almost three million barrels a day of spare capacity, but it doesn't," Rothman says. "And demand, up until very recently, has been more robust than most realize." He estimates that the Organization of the Petroleum Exporting Countries' spare capacity is just over one million barrels a day—a fraction of the 100 million barrels in global demand a day. U.S. oil-production growth, meanwhile, has slowed.
Exxon Mobil anticipates that oil demand will continue to rise for the next two decades, an estimate supported by consumption trends, population growth, and rising living standards in the developing world (more cars and air conditioners). Chevron, which has a similar forecast, estimates that the industry will have to spend $10 trillion through 2040 to replace oil reserves and meet demand.
Rothman's view is that oil demand, which is dominated by transportation, will stay steady despite price moves. "Oil demand has contracted only twice in the past 35 years," he says, noting that the biggest decline, during the 2009 downturn, was only about 1% globally.
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As I have been telling you for months in my podcasts, the assumption that OPEC has several million barrels of additional production capacity is TOTALLY WRONG. Plus, most of the additional production capacity is in Saudi Arabia and they aren't going to do anything to lower oil prices since (a) they NEED Brent over $80/bbl and (b) they went to IPO Aramco at a much higher oil price in 2020.- Dan