New Oil Price Forecast - July 6
Posted: Mon Jul 06, 2020 9:32 am
Note received from Raymond James this morning. I hope all of you listened carefully to the interview with Marshall Atkins, head of RJ's energy sector team, that we sent out last week.
RJ's new oil price forecast:
"Last week, we provided a broadly upbeat update on global oil demand. The initial demand hit in the early months of the COVID pandemic was less extreme than we had modeled, and even more importantly, the pace of economic reopening was rapid. Insofar as we have demand-related concerns, they pertain to the likelihood of a severe "second wave" during the upcoming winter in the Northern Hemisphere. Today we will turn our attention to the supply side of the equation and update our oil price forecast. With OPEC being disciplined, and non-OPEC organic field declines accelerating, we forecast hefty inventory draws on a full-year basis in both 2021 and 2022. The industry will ultimately need pricing much higher than the current futures strip, and we are raising our WTI forecast to $40/Bbl in 3Q20 and 4Q20, followed by $55 average in 2021 ($70 in 4Q21)."
"Even aside from the shut-ins, U.S. oil production has started to roll over, due to the epic collapse in drilling activity: the rig count (~250) is currently at the lowest level in modern U.S. history. While most of the shut-in volumes can be brought back on relatively quickly, the impact of the industry's extreme austerity - drastic cutbacks in capital spending - will last much longer. At strip pricing, we anticipate that production will remain in non-stop decline through at least 2025."
If you would like to read RJ's full report, send me an email: dmsteffens@comcast.net
RJ's new oil price forecast:
"Last week, we provided a broadly upbeat update on global oil demand. The initial demand hit in the early months of the COVID pandemic was less extreme than we had modeled, and even more importantly, the pace of economic reopening was rapid. Insofar as we have demand-related concerns, they pertain to the likelihood of a severe "second wave" during the upcoming winter in the Northern Hemisphere. Today we will turn our attention to the supply side of the equation and update our oil price forecast. With OPEC being disciplined, and non-OPEC organic field declines accelerating, we forecast hefty inventory draws on a full-year basis in both 2021 and 2022. The industry will ultimately need pricing much higher than the current futures strip, and we are raising our WTI forecast to $40/Bbl in 3Q20 and 4Q20, followed by $55 average in 2021 ($70 in 4Q21)."
"Even aside from the shut-ins, U.S. oil production has started to roll over, due to the epic collapse in drilling activity: the rig count (~250) is currently at the lowest level in modern U.S. history. While most of the shut-in volumes can be brought back on relatively quickly, the impact of the industry's extreme austerity - drastic cutbacks in capital spending - will last much longer. At strip pricing, we anticipate that production will remain in non-stop decline through at least 2025."
If you would like to read RJ's full report, send me an email: dmsteffens@comcast.net