Raymond James Oil Price Forecast as of April 24

[dan_s]

"Following the strong bounce year-to-date, the oil price is approaching last year’s highs. As sentiment on oil continues to improve, we see a broadly supportive fundamental backdrop: the larger U.S. producers are exhibiting restraint in capital allocation; OPEC+Russia’s production cuts are noticeably contributing to inventory draws, with OPEC supply at four-year lows; U.S. sanctions against Iran are about to become more impactful; the picture for global demand growth is broadly upbeat; and IMO 2020 is looming less than nine months from now. The 12-month futures strip ($64.69/Bbl for WTI and $71.82/Bbl for Brent) shows modest backwardation for both Brent and WTI; for comparison, our 2019 forecast is $62 WTI/$72 Brent and 2020 forecast is $92.50 WTI/$100 Brent. Several wild cards remain in play, such as: 1) on the bullish side, the possibility of supply disruptions above and beyond the current ones, such as the fluid political situation in Venezuela; and 2) on the bearish side, the prospect of global macro slowdown and resulting impact on oil demand."

In my opinion, the "Right Price" today for WTI is $60 to $65, but also IMO there should be a $10/bbl risk premium for what's happening with Iran, Venezuela and Libya. IMO 2020 regs will make the global oil market much tighter in 2020, so Raymond James' forecast of $92.50/bbl for WTI in 2020 is definitely not out-of-reach. - Dan