What will Oil Prices do in 2018?
Posted: Mon Dec 18, 2017 10:57 am
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.
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.
---------------------
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.