2014 is looking good
Posted: Tue Oct 08, 2013 8:35 pm
My outlook for 2014 is much better today than it was just three months ago.
Starting mid-July, unrest in the Middle-East / North Africa resulted in supply outages in Libya, Iran, Iraq, Nigeria, South Sudan and Yemen. Those outages are near 3 million bbls of high quality crude oil today. As a result, the price of crude spiked significantly. Since Syria has moved off the front page (despite no resolution), crude oil prices have fallen by around 7% from its August high, but continues to trade at over $100 per barrel. WTI is now over $103/bbl and Brent is over $110/bbl.
All indications are that the oil markets will remain tight for AT LEAST six months. Demand always dips in the 2nd quarter as winter comes to an end.
The U.S. Energy Information Administration (EIA) has also revised its forecast, estimating the average price per barrel for West Texas Intermediate (WTI) in 2013 will be $98 and fall to $96 per barrel in 2014. The EIA has also forecast that Brent will average $108 per barrel in 2013 and $102 in 2014. These estimates are far more positive than the outlook for the prices of crude that the EIA released earlier in 2013, with both being around 16% higher than they were in April this year.
It is also expected that ongoing geopolitical tensions and conflict in the Middle-East will continue to create supply outages, which in conjunction with growing demand for crude from rapidly expanding emerging economies, will continue to push crude prices higher over the long term. Global demand for crude oil will continue to move higher. IEA is forecast that demand for oil (now close to 92 million bbls per day) will go up by AT LEAST a million bbls per day each year for the next 30 years.
Even if crude oil price do pull back slightly next spring. I now believe there is a very good chance that natural gas prices firm up to give E&P revenues a nice boost. Chances are we will see $4.00/mcf in the U.S. this winter, maybe by December 1. A cold winter will drive down storage levels and push prices higher next year. Regardless of the weather, natural gas supply/demand will tighten.
Starting mid-July, unrest in the Middle-East / North Africa resulted in supply outages in Libya, Iran, Iraq, Nigeria, South Sudan and Yemen. Those outages are near 3 million bbls of high quality crude oil today. As a result, the price of crude spiked significantly. Since Syria has moved off the front page (despite no resolution), crude oil prices have fallen by around 7% from its August high, but continues to trade at over $100 per barrel. WTI is now over $103/bbl and Brent is over $110/bbl.
All indications are that the oil markets will remain tight for AT LEAST six months. Demand always dips in the 2nd quarter as winter comes to an end.
The U.S. Energy Information Administration (EIA) has also revised its forecast, estimating the average price per barrel for West Texas Intermediate (WTI) in 2013 will be $98 and fall to $96 per barrel in 2014. The EIA has also forecast that Brent will average $108 per barrel in 2013 and $102 in 2014. These estimates are far more positive than the outlook for the prices of crude that the EIA released earlier in 2013, with both being around 16% higher than they were in April this year.
It is also expected that ongoing geopolitical tensions and conflict in the Middle-East will continue to create supply outages, which in conjunction with growing demand for crude from rapidly expanding emerging economies, will continue to push crude prices higher over the long term. Global demand for crude oil will continue to move higher. IEA is forecast that demand for oil (now close to 92 million bbls per day) will go up by AT LEAST a million bbls per day each year for the next 30 years.
Even if crude oil price do pull back slightly next spring. I now believe there is a very good chance that natural gas prices firm up to give E&P revenues a nice boost. Chances are we will see $4.00/mcf in the U.S. this winter, maybe by December 1. A cold winter will drive down storage levels and push prices higher next year. Regardless of the weather, natural gas supply/demand will tighten.