Oil Price Forecast - April 17

[dan_s]

This forecast is from HFI with my comments in blue.
---------------------------------------------------
It's that time again. It's that time to make a forecast on the oil market with almost a high degree of confidence in getting it wrong, but hey, you can't fault me for trying.

There are a few central drivers in the oil market this year:

> Slowing US oil production. < This is the one that I doubt most investors see coming. The Permian Basin is showing signs of peaking and outside of the Permian Basin there is not much upside for oil production in the U.S.
> OPEC+ voluntary production cut unwinding. < Saudi Arabia is the only OPEC+ country that actually has a lot of supply upside potential.
> Global oil demand. < MY TAKE is that a major global recession is the only thing that will reduce oil demand. Barring a recession, oil demand will increase 1.5 to 2.0 million bpd per year through at least 2030. Why? Because global population growth is over 21.7 million YTD (over 200,900 per day). All humans are energy consumers at birth and 80% of that energy will be generated by burning fossil fuels.
> US and China SPR release. < Short-term impact only.

If you can get all 4 of these variables right, you will have a good grasp on the general direction of the oil market. The hardest variable to get right is global oil demand as demand is a moving target, while supplies are largely fixed.

Notice how I don't use geopolitics as a driver for the oil market? As we've been saying for a few weeks now, oil bulls should consider geopolitics to be nothing but a distraction. It takes away your focus on what's important, and in my view, considering the fundamentals we are seeing in oil, geopolitics will simply accelerate key trends rather than being a driver.

Price Outlook
My view on the oil price trajectory is that there will be no oil price spike this year. Instead, I think as the current oil price correction takes place (low $80s), oil market fundamentals will drive prices back to a higher structural range ($85 to $95). We should see oil trade rangebound in this range for the 2nd half of 2024 with a possibility of surprising to the upside by the end of 2025 depending on the US oil production outlook. < When it becomes clear to most investors (the "Big Paradigm Shift") that U.S. oil production has peaked, oil prices will go up.