Oil Price Prediction

dan_s · Post by **dan_s** » Thu Jul 05, 2018 6:18 pm

On April 2, 2018 I wrote an article that was published on OilPrice.com. In the article I predicted that WTI would move to $75/bbl this summer.

Here is the article: https://oilprice.com/Energy/Crude-Oil/O ... n-End.html

I thought it would take until Labor Day to move over $75/bbl and it still may take that long before we are firmly in Stage 5 of the Rebound Phase on this oil price cycle. WTI moved briefly over $75/bbl early this week, but it has pulled back thanks in large part to President Trump's tweets.

The global oil market is actually tighter now than I thought it would be back in April. WTI would be higher today if now for the growing FEAR of Permian Basin pipeline bottlenecks and the widening gap between Brent and WTI. I actually saw an article today from Wells Fargo that said the WTI discount to Brent would widen to $20/bbl by year-end. That might happen, but I think it will be caused by Brent going a lot higher (say $100/bbl) than for WTI going lower.

I cannot stress enough how important it is that you know where your companies sell their oil. Upsteam companies that can get their oil to the Gulf Coast will get very close to Brent oil prices. I am sure this will be a hot topic in Q2 earnings reports.

Most of the Sweet 16 stocks are still trading as if WTI is $50/bbl or even lower. Plus, no one seems to notice that natural gas is trading much higher than anyone expected it would back in early April.

I think WTI will move firmly above $75 by Labor Day, marking the beginning of Phase 5, which tops out at $82.58/bbl because:
> Trump's Tweets do not magically create more oil supply
> Demand for oil is going up over a million barrels per day this quarter
> OPEC has very little, if any, remaining capacity than what they said they would produce on June 22 in Vienna
> The situation in Venezuela is bad and heading to terrible. Their exports could go to zero by year-end.
> U.S. oil production growth has slowed down

Just remember, oil traders are "Nervous Nellies" and oil prices never go up or down in a straight line. There are going to big price reactions (like today) to rather insignificant headlines.