Energy Prospectus

Note from Raymond James

The past few weeks seem like an eternity in the oil market with fears of the new Omicron COVID variant, global SPR releases, and OPEC+ drama grabbing the headlines and pushing Brent from ~$85 last month to sub-$70 today. However, our bullish oil view over the next few years not only remains firm, but we’re actually increasing our long-term price forecast. Our new price deck envisions WTI starting 2022 at $70/Bbl, averaging $75 for FY22, reaching $80 by 4Q22 and staying at that level for 2023. As we’ll outline in today’s Stat, there are several reasons for remaining bullish in the face of current uncertainty: (1) Low global inventories, (2) visible recovery in demand, (3) the coming collapse in OPEC+ spare capacity, and (4) the need for a higher price to further incentivize U.S. supply (and keep a lid on demand).


The summary version: Global inventory draws of 1.1 million bpd in 2021 (and likely higher), with a roughly balanced market in 2022/2023.

Near-term items to watch: Omicron impacts, Global SPR releases, demand in Northern Hemisphere winter, OPEC+ response.

What does a demand recovery look like into 2023?

U.S. E&P Capital Discipline Remains the Most Bullish Long-Term Development.

OPEC+ discipline has cleaned up the inventory overhang (and then some). Long-term we need to pull every "lever" to improve dangerously low inventory levels.

OECD days of consumption have plummeted — and will remain low.

Tight inventory outlook, limited global buffer supports a bullish price outlook: Adjusting 2022 shape of price deck, raising 2023 and long-term forecast.


December 6, 2021
Raymond James Equity Research

This is Raymond James "official" oil price forecast, but Marshall Atkins recently made a presentation in Houston where he said his opinion was that oil will spike to $110/bbl in mid-2022 when OPEC+ spare capacity is exhausted.

RJ's Official Forecast: $75-80/bbl needed to balance the market.
"We believe $75-80/bbl oil price is going to be needed to "meet the call" on U.S supply to balance the global oil market the next few years as OPEC excess capacity dries up. In 2021, the U.S. benefited from a record DUC draw that the industry will not have next year. Assuming 650 average US drilling rigs in 2022, we forecast ~840 Mbbl/d of total liquids growth. In 2023, assuming 700 average rigs we anticipate just below 500 Mbbl/d of growth."

Key Reason: OECD oil and refined product inventories are way below where they should be in "Post-Pandemic World". This world will need every drop of OPEC+ oil by Q3 AND this world will need non-OPEC+ oil production to grow..