Oil opened higher on Monday morning as new data shows that OPEC+ actions to tighten the market are well underway. Plus, economic data from China shows that the nation's economy is not slowing. U.S. Dollar Index also declined last week; the dollar has an inverse relationship with oil price.
On January 3, reported OPEC oil supply fell in December by the largest amount in almost two years, a Reuters survey found, as top exporter Saudi Arabia made an early start to a supply limiting accord while Iran and Libya posted involuntary declines. The 15-member Organization of the Petroleum Exporting Countries pumped 32.7 million b/d last month, the survey on Thursday found, down 460,000 b/d from November and the largest month-on-month drop since January 2017. The survey suggests Saudi Arabia and some of its allies acted unilaterally to bolster the market. The formal accord by OPEC and its allies to cut supply in 2019 took effect only on Tuesday.
The biggest drop in OPEC supply last month came from Saudi Arabia and amounted to 400,000 bpd, the survey showed. Saudi supply in November had hit a record 11 million b/d, after U.S. President Donald Trump demanded more oil be pumped to curb rising prices and make up for losses from Iran. The kingdom has said it plans to go even further in January by delivering a larger cut than required under the OPEC+ deal. The second biggest drop occurred in the United Arab Emirates, which like Saudi voluntarily scaled back supply, the survey found. The third largest was an involuntary cut by Libya, where unrest led to the shutdown of the country's biggest oilfield. Output from Iran declined further as U.S. sanctions discouraged companies from buying its oil. According to industry sources, however, Iran maintained its exports, helped by sanctions waivers granted to eight buyers as well as dogged Iranian efforts to keep selling crude.
On January 4, Reuters reported oil prices rose 2 percent on Friday after proposed trade talks between the United States and China eased some fears about a global economic slowdown, but gains were capped after the United States reported a sharp build in refined product inventories. U.S. energy firms this week cut oil rigs for the first time in three weeks, reducing the rig count by eight to 877. Some analysts were forecasting the first decline in the rig count - an indicator of future production - in three years in 2019.
Oil drew support from comments by China's commerce ministry, which said Beijing would hold vice-ministerial trade talks with U.S. counterparts on January 7 and 8. China's services sector extended its expansion in December, a private survey showed on Friday, bucking a trend of downbeat economic data. "Recent Chinese data is not confirming the doom-and-gloom trend," said Olivier Jakob, oil analyst at Petromatrix. "And you've got OPEC cutting." A robust U.S. jobs report also added to broader market optimism.
Oil Price - Jan 7
Oil Price - Jan 7
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Jan 7
Zacks on January 7, 2019: Crude Oil Prices Likely to Remain Firm in 2019
"The U.S. benchmark WTI crude ended 2018 at a price of $44.48 per barrel while the global benchmark Brent crude oil ended 2018 at a price of $51.49. Several oil experts have forecasted that both benchmark prices may move up to 20-30% in 2019.
The U.S. Energy Information Administration has predicted that Brent crude will hover around $61 per barrel in 2019 while WTI crude will be around $54 per barrel. Reuters’ poll has predicted average price per barrel of Brent crude and WTI crude price at $74.50 and $67.45, respectively, in 2019.
Per Brian Youngberg, senior energy analyst at Edward Jones, average Brent price will remain around $66 a barrel while WTI price will remain around $60 per barrel. It is evident from these numbers that the majority of the forecasts are on the higher side."
"The U.S. benchmark WTI crude ended 2018 at a price of $44.48 per barrel while the global benchmark Brent crude oil ended 2018 at a price of $51.49. Several oil experts have forecasted that both benchmark prices may move up to 20-30% in 2019.
The U.S. Energy Information Administration has predicted that Brent crude will hover around $61 per barrel in 2019 while WTI crude will be around $54 per barrel. Reuters’ poll has predicted average price per barrel of Brent crude and WTI crude price at $74.50 and $67.45, respectively, in 2019.
Per Brian Youngberg, senior energy analyst at Edward Jones, average Brent price will remain around $66 a barrel while WTI price will remain around $60 per barrel. It is evident from these numbers that the majority of the forecasts are on the higher side."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Jan 7
Rachel Notley, premier of Canada’s oil-rich province of Alberta, announced that she will force oil producers to cut production level by 9% in 2019 in order to stop crude oil prices from sliding further. Notably, Canada is the fourth largest oil producer worldwide.
Fitch Solutions Macro Research Group reported that oil supply from Venezuela will drop a whopping 31.2% in 2019 after falling 29.3% in 2018. Venezuela, once the fourth largest oil producer in the world, is suffering owing to lack of modernization of oil plants.
Fitch Solutions Macro Research Group reported that oil supply from Venezuela will drop a whopping 31.2% in 2019 after falling 29.3% in 2018. Venezuela, once the fourth largest oil producer in the world, is suffering owing to lack of modernization of oil plants.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Jan 7
Raymond James Energy Stat on Monday, January 7
We forecast $62 WTI average for 2019, with a back-end-loaded rally leading to 2020 oil price averages about 90% above "strip" prices.
Currently, the oil markets are indicating minimal upside from current levels over the next five years. While the past few months have shown that sentiment matters more in the short run than fundamentals, we think that fundamentals and the physical oil market will ultimately prevail over momentum-driven "quant funds". Given our forecast for sizable 2019/20 drawdowns in global inventories, we believe that oil should post 50+% gains from current levels over the next 12-18 months.
The combination of 1) OPEC+Russia production cuts, 2) IMO 2020, and 3) slowing U.S. oilfield activity should drive global inventories well below normal. Accordingly, we believe a robust back-end-loaded 2019 oil price rally is on deck, hence our full-year forecast of $62 WTI and $72 Brent. We expect this momentum to carry into 2020, driving Brent to average $100 (or better) in 2020.
Despite the horrific end to 2018, our fundamental oil supply/demand models looks extremely bullish for 2019 and 2020. After all, the solution
to low oil prices is low oil prices. Here is how we see 2019 playing out for oil and gas investments:
> First, we believe that oil prices will recover slowly in early 2019 but gain steam in the back half of the year with Brent prices exiting 2019 in the $85/Bbl range (or about 50% ABOVE current
2019 oil futures strip pricing) for a full-year Brent average of $72/Bbl (or roughly flat with 2018).
> Second, we expect a down year in U.S. natural gas with 2019 gas prices averaging around $2.80, and thus our preference for oil-centric stocks remains intact.
> Third, bearing in mind just how beaten down energy stocks were in 2018, we think that higher-beta names should generally outperform over a 12-month timeframe.
In other words, we think 2019 is setting up to be a very good year for oil and gas investments.
We forecast $62 WTI average for 2019, with a back-end-loaded rally leading to 2020 oil price averages about 90% above "strip" prices.
Currently, the oil markets are indicating minimal upside from current levels over the next five years. While the past few months have shown that sentiment matters more in the short run than fundamentals, we think that fundamentals and the physical oil market will ultimately prevail over momentum-driven "quant funds". Given our forecast for sizable 2019/20 drawdowns in global inventories, we believe that oil should post 50+% gains from current levels over the next 12-18 months.
The combination of 1) OPEC+Russia production cuts, 2) IMO 2020, and 3) slowing U.S. oilfield activity should drive global inventories well below normal. Accordingly, we believe a robust back-end-loaded 2019 oil price rally is on deck, hence our full-year forecast of $62 WTI and $72 Brent. We expect this momentum to carry into 2020, driving Brent to average $100 (or better) in 2020.
Despite the horrific end to 2018, our fundamental oil supply/demand models looks extremely bullish for 2019 and 2020. After all, the solution
to low oil prices is low oil prices. Here is how we see 2019 playing out for oil and gas investments:
> First, we believe that oil prices will recover slowly in early 2019 but gain steam in the back half of the year with Brent prices exiting 2019 in the $85/Bbl range (or about 50% ABOVE current
2019 oil futures strip pricing) for a full-year Brent average of $72/Bbl (or roughly flat with 2018).
> Second, we expect a down year in U.S. natural gas with 2019 gas prices averaging around $2.80, and thus our preference for oil-centric stocks remains intact.
> Third, bearing in mind just how beaten down energy stocks were in 2018, we think that higher-beta names should generally outperform over a 12-month timeframe.
In other words, we think 2019 is setting up to be a very good year for oil and gas investments.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group