Energy Prospectus

U.S. Natural Gas price will average over $3.00 in 2018
> Winter heating season will end with storage 300+ Bcf below 5-year average. This should support gas price.
> U.S. natural gas production won’t grow as fast as the predictions

WTI Crude oil will average $65 - $70 in 2018
> Demand spike in 2nd quarter will push WTI over $70
> Global Demand will go over 100,000,000 Bbl per day within 6 months

If oil stays over $60, the Sweet 16 will be up more than 50% by year-end


“Forecasting is hard, especially when it is about the future” - Yogi Berra

SINGAPORE (Reuters) - Brent crude prices were on Tuesday settling in around $70 per barrel, levels last seen before the start of an oil market slump in late 2014.

Prices have been driven up by production curbs in OPEC nations and Russia, as well as by robust demand on the back of healthy global economic growth.

Brent crude futures, the international benchmark for oil prices, had dipped 22 cents to $70.04 per barrel by 0213 GMT on Tuesday from the previous day's close. But traders said Brent was well supported overall around this level.

Brent hit $70.37 a barrel on Monday, its strongest since December, 2014, which was at the beginning of a three year oil price slump.

U.S. West Texas Intermediate (WTI) crude futures were at $64.53 a barrel, up 23 cents, or 0.36 percent from their last settlement. WTI hit a December-2014 peak of $64.89 a barrel in early trading.

"We have updated our supply/demand balances to reflect a faster-than-expected tightening in the global oil market due to improving cyclical conditions, cold winter weather, and higher than expected OPEC compliance," Bank of America Merrill Lynch (NYSE:BAC) said.

In an effort to tighten markets and prop up prices, the Organization of the Petroleum Exporting Countries (OPEC) and Russia started to withhold production in January last year, and the cuts are set to last through 2018.

This restraint has coincided with healthy oil demand and economic growth, pushing up crude prices by more than 13 percent since early December.

"We now see a deficit of 430,000 barrels per day (bpd) in 2018 compared to 100,000 bpd prior, and thus see Brent crude oil prices averaging $64 per barrel in 2018 compared to $56 prior. Our WTI projection also moves up from $52 per barrel to $60 per barrel for the same reasons," Bank of America Merrill Lynch said.

Crude futures have also been supported by a weak dollar, which fell to its lowest level in three years late on Monday against a basket of other leading currencies.

A weakening dollar often triggers investment into liquid commodity futures like gold and crude oil.

The major factor that in late 2017 held back crude prices, the surge in U.S. production, has stalled at least temporarily as icy winter weather in North America has shut down some facilities. Instead of hitting 10 million bpd this month, as widely expected, U.S. production fell from 9.8 million bpd in December to 9.5 million bpd currently.

Despite this, most analysts still expect U.S. production to break through 10 million bpd soon.

Read this: https://investoralmanac.com/2018/01/14/ ... hold-cash/
With average global demand growth expected to be at least 1.3 million bbl/d in 2018, we estimate the global inventory overhang would clear before the end of next June, or roughly six months prior to the end of OPEC’s current quota agreement
Last time this level of inventory was reached, oil prices were hovering about $100/bbl, while global demand was about 5 million bbl/d lower than it is today

#BUSINESS NEWSJANUARY 15, 2018 / 8:16 PM / UPDATED 3 HOURS AGO
U.S. oil industry set to break record, upend global trade
Liz Hampton
9 MIN READ
HOUSTON (Reuters) - Surging shale production is poised to push U.S. oil output to more than 10 million barrels per day - toppling a record set in 1970 and crossing a threshold few could have imagined even a decade ago.



https://www.reuters.com/article/us-usa- ... SKBN1F50HV

The world is going to need every drop of the U.S. oil.
As I have said in many of my posts and podcasts: (a) U.S. oil production will continue to go up, probably by about 500,000 barrels per day in 2018 and another 500,000 barrels per day in 2019 and (b) U.S. oil production CANNOT KEEP UP WITH RISING GLOBAL OIL DEMAND ON ITS OWN.
I have also said many times, that U.S. shale oil production will peak in a few years because "the math does not work" anymore after most of the Tier One leasehold is drilled up and we have several hundred thousand high decline rate horizontal tight oil wells on decline.

Global demand for oil is going up by AT LEAST 1,500,000 barrels per day each year through 2020

BTW Global demand for oil EXCEEDS supply by at least 1,000,000 barrels per day TODAY. < This is why U.S. crude oil inventories are on STEEP DECLINE. European and floating oil storage is also on steep decline.

In that you are predicting average 2018 crude prices if $65- 70, why are you still using $50 in your forecast models?

All of the forecast/valuation models are macro driven, so you can put whatever oil, gas and NGL prices that you wish into the models (at the bottom) and the spreadsheet will recalculate Revenues, EPS, CFPS and stock price valuation.

I just want to hold the commodity prices steady until I see their Q4 results and get a look at their latest hedge positions. I maintain over 40 active valuation models and it is impossible for me to change them weekly, but you sure can. Try it on a few.

Just keep in mind that it is not as simple as adding $10 to the oil price. You need to consider their hedges and regional price differentials.

ALL of the Sweet 16 should be trading a lot higher if oil stays over $60/bbl.