What is the "Right Price" for WTI Oil?

[dan_s]

Let this sink in:
1. In June 2008 oil peaked at a nominal price of $126.33 (inflation-adjusted price of $183.40)
2. Oil prices fell to the ridiculously low COVID-induced glut price of $11.18 in April 2020 (inflation-adjusted $13.86).
3. The average inflation-adjusted price for crude oil since 1946 is $57.18, which is still about one-third of the 2008 price.
4. The average inflation-adjusted price since 1980 is higher at $70.17
5. The average inflation-adjusted price since 2000 is even higher at $78.37.

For the last nine quarters (Q1 2023 to Q1 2025) WTI averaged $76.07 > Quarterly high of $82.32 in Q3 2023 and quarterly low of $70.28 in Q4 2024.
In Q1 2025 WTI averaged $71.42. < So, this is the "Before the Tariff War Oil Price".

If WTI stays in the low $60s, U.S. oil production will go on decline soon and total non-OPEC+ production is likely to go on decline in 2026. Once the decline in non-OPEC oil production is confirmed it will be a major Paradigm Shift and it will be difficult to stop the production decline.

MY TAKE: If the Tariff War ends in June and the Republicans pass the income tax bill, I believe the risk of U.S. recession is zero and the risk of a global recession is very low. Trump will go to maximum pressure on Iran soon. Unless Saudi Arabia wants to punish the cheaters within OPEC+ at a significant cost for themselves, they will stop raising the oil supply in Q3. Plus, June - September is the highest demand period of the year for gasoline and diesel.

Bottomline: WTI will ramp back up to the "Before the Tariff War Oil Price" by year end and average $75/bbl in 2026

Read this to get a better understanding of why WTI in the $60s is not based on supply/demand fundamental. It is just based on FEAR of recession.
https://inflationdata.com/articles/inflation-adjusted-prices/historical-oil-prices-chart/

[dan_s]

Note from Anas Alhajji May 15

EOA’s Main Takeaway
We've warned about declining distillate inventories for weeks. Last week, they hit 103.6 million barrels, the lowest since early May 2008 when oil prices neared record highs (See Figure 5).

Cushing inventories dropped, staying below the 5-year range (Figure 11). They're not a concern yet but could be if Canadian imports decline.

Oil prices dipped slightly today but have risen since OPEC+ decided to boost production by 411,000 barrels per day in June. Contrary to predictions of oil prices falling to the $40s, the limited impact of the cut and positive tariff news shifted market sentiment.

OPEC released its monthly oil report earlier today. OPEC lowered its 2025 forecast for oil supply growth from non-OPEC+ producers to 800 kb/d, down from 900 kb/d, citing expected declines in capital spending due to falling oil prices. The slowdown could help OPEC+ stabilize the market. Brent crude recently dropped to its lowest since 2021, settling near $60. OPEC anticipates a 5% drop in non-OPEC+ exploration and production investment in 2025, despite a $3 billion rise in 2024. US output remains a key driver. Global demand forecasts remain unchanged. OPEC+ production declined by 106 kb/d in April, mainly due to Kazakhstan, which has struggled to meet its quotas.

Our readers and listeners first learned that OPEC and OPEC+ supply declined in April, about 10 days ago, when we published a note after the OPEC+ V8 decision to raise the production ceiling by 411 kb/d in June. We stated that despite the planned increase, actual supply is decreasing. This is now confirmed: OPEC production fell by 62 kb/d to 26.710 mb/d (See Figure 12). Production from the 10 non-OPEC members dropped by 45 kb/d. Overall, OPEC+ production decreased by 106 kb/d to 40.916 mb/d...