Raymond James Energy Team Update - July 20

[dan_s]

This is from an interview on July 8. Pavel Molchanov is the head of RJ's Energy Team based in Houston.

On July 8 WTI was trading at about $72/bbl

Question: I want to ask about US crude, if you think that we could see an uptick in oil production?

PAVEL MOLCHANOV: Well as far as supply in the US and, indeed, just about anywhere outside of OPEC, that's not likely at all in the next six months. Capital budgets across the board this year by oil companies are the lowest they've been in decades. Maybe that will change in '22. We will find out at the end of the year. But as it stands, we're not looking for US supply or Brazilian supply or North Sea supply to pick up for quite a while. The entire industry is so fixated on discipline-- capital discipline, supply discipline. So OPEC countries have the ability to ramp production back up at their discretion, but in the US the rig count is at a level where there's just not going to be production growth in the foreseeable future.

Question - And just last one for you here. I think this is the question that so many folks are really wondering because a lot of consumers have been paying a lot of attention to what's been happening to oil lately because they've been feeling the pain at the pump, so to speak. So let's just ask, how much longer you think that that could continue?

PAVEL MOLCHANOV: Well, I'll take a step back and say that US consumers actually have it really good when it comes to fuel prices, globally speaking. Yes, of course, prices are higher than they were a year ago or two years ago. But compared to what their counterparts pay across Europe, in Japan and Australia, it's much cheaper. Even in California, the most expensive gasoline, it's cheaper. So if demand gradually recovers to pre-COVID levels by, let's say, next summer and OPEC continues to ramp production back up, we think that the price of crude, the main determinant of gasoline, obviously, will be flattish to slightly up from current levels. And it's worth pointing out, the commodity market is actually signaling that prices will go down from current levels. We disagree. We think prices are more likely to be higher, not dramatically, but maybe a little higher by the end of the year than they are today.

[dan_s]

Jeff Currie the top energy sector analyst at Goldman Sachs sees upside to Oil Prices.
US investment bank Goldman Sachs (NYSE:GS) stated the extension of the OPEC+ deal supports its view on oil prices and present a modest upside to its $80 per barrel summer Brent forecast. Whilst oil prices took a walloping Monday, Goldman did issue a caveat that upcoming weeks should see tangible “gyration” due to risks from rising Delta variant headwinds.