Bullish or Bearish for Oil Next Year? Here's What Big Banks Say. Bloomberg.
Oil is on course for a second annual gain after last month’s decision by OPEC and its allies to extend production curbs in a bid to shrink bloated inventories. While some banks raised their 2018 crude price forecasts, others were less bullish.
> Among the most bullish is Goldman Sachs Group Inc., which boosted its outlook for Brent crude by almost 7 percent to $62 a barrel, citing stronger-than-expected commitment from OPEC and partners.
> That compares with an average price of about $54 a barrel this year. Another bull, JPMorgan Chase & Co., says “solid fundamentals and tightening balances,” as well as OPEC’s willingness to balance markets, are reasons for its positive outlook.
> On the other end of the spectrum is Citigroup Inc., which says there’s a risk the current bullish supply and demand dynamic will run out of steam, and an upsurge in U.S. shale production could spook the market.
> Credit Suisse thinks WTI will average $55 in the first two quarters of 2018 and then average $59 in the last two quarters.
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As I discuss in today's newsletter, tax loss selling is keeping a lid on energy sector stock prices until late December. We might see a slight build in OECD inventories in Q1 unless weather is very cold in Europe (more demand for heating). In Q2 2018 demand for oil will exceed supply by a wide margin, maybe 2 million barrels per day. Then it will get interesting.
The stock valuations that I show in the newsletter are all based on WTI at $50 and HH gas at $3.00 for 2018.
What will Oil Prices do in 2018?
What will Oil Prices do in 2018?
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: What will Oil Prices do in 2018?
Raymond James Energy Stat dated December 18, 2017:
"In our recent Stat of the Week from December 4, we addressed the decision by the OPEC coalition (OPEC plus Russia) to extend
production cuts through 2018 and the impact upon our global oil model. As a follow up, today’s report takes the discussion a step
further and tries to quantify the OPEC coalition’s potential production increase after the cuts expires at year-end 2018. Put simply,
expectations for OPEC supply growth in a post-cut world appear to be far too aggressive, with many industry pundits mistakenly
assuming that global oil supply will surge by ~1.8 million bpd once the cuts expire. This is a gross overestimation of real OPEC
coalition production growth potential by 2019. That is because the headline OPEC coalition cut numbers are based off artificially
inflated and unsustainable rates from late 2016."
Send us an e-mail if you'd like to see the full report. I cannot send it out as a blanket email to all EPG members. They get pissed if I do that.
"In our recent Stat of the Week from December 4, we addressed the decision by the OPEC coalition (OPEC plus Russia) to extend
production cuts through 2018 and the impact upon our global oil model. As a follow up, today’s report takes the discussion a step
further and tries to quantify the OPEC coalition’s potential production increase after the cuts expires at year-end 2018. Put simply,
expectations for OPEC supply growth in a post-cut world appear to be far too aggressive, with many industry pundits mistakenly
assuming that global oil supply will surge by ~1.8 million bpd once the cuts expire. This is a gross overestimation of real OPEC
coalition production growth potential by 2019. That is because the headline OPEC coalition cut numbers are based off artificially
inflated and unsustainable rates from late 2016."
Send us an e-mail if you'd like to see the full report. I cannot send it out as a blanket email to all EPG members. They get pissed if I do that.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group