Oil Price Forecast for 2016

[dan_s]

http://www.fool.com/investing/general/2 ... gn=article

A few things to keep in mind:
1. Crude oil in storage will not "fill to the brim". Oil does not just go to storage because there is too much of it. Refiners control most of the oil in storage. They are buying all of it that they can because they expect the price of crude oil (their raw material) to rise in 2016 and demand for refined products continues to increase. We have approximately 640 million barrels of storage capacity in the U.S. and we are not close to that yet.
2. U.S. oil production is on decline and the rate of decline will accelerate in 2016. In 2015, increased production from the Gulf of Mexico offset part of the big decline in onshore production. Shale oil production is falling by more than 100,000 barrels per day each month and lots of stripper wells are now sub-economic. If oil stays under $40/bbl the U.S. could loose up to 400,000 barrels per day of stripper production. I am expecting U.S. oil production to drop to around 8.0 million barrels per day if oil stays under $50/bbl.
3. Even if oil prices spike in 2016 it will take at least six months before U.S. oil production starts to rise again.
4. The discount of WTI to Brent is now gone.