Oil Price Forecast
Posted: Mon May 02, 2016 10:27 am
From Tudor Pickering Holt this morning:
Oil market update – We are doubling down on $80/bbl late ’16 and $85/bbl in ’17 (WTI $46/bbl) – No change to our view on materially stronger oil prices later this year and ’17. Rather a re-emphasis of our conviction that global supply and demand are improving now and are pointing to a tightening market in 2H16 and a very tight market in ’17. The market will start to focus on ’17 and the need for OPEC to increase supply to balance an undersupplied market with scant visible excess capacity. The lack of visible excess capacity (oil that can be quickly and sustainably returned to the market) will create a scarcity premium that could overwhelm the current market sentiment that US production can respond quickly to balance the market.
EIA released Feb’16 US oil production which indicated total US supply declined 51kbpd m/m and is 322kbpd lower y/y. Onshore L-48 monthly decline of 23kbpd was shallower than recent months with a 26kbpd uptick in New Mexico (assuming a reversal of the weather-related decline in Dec ’15). Feb’16 L-48 onshore production is down 414kbpd y/y. Bottom line – declines are happening now and with rig count struggling, the declines will continue through year-end and likely well into 2017.
At our luncheon in Houston on April 25, Raymond James said WTI should by $50 by end of June and reach $70 by end of Q3.
The presentation slides that Raymond James spoke from are available on our website.
Oil market update – We are doubling down on $80/bbl late ’16 and $85/bbl in ’17 (WTI $46/bbl) – No change to our view on materially stronger oil prices later this year and ’17. Rather a re-emphasis of our conviction that global supply and demand are improving now and are pointing to a tightening market in 2H16 and a very tight market in ’17. The market will start to focus on ’17 and the need for OPEC to increase supply to balance an undersupplied market with scant visible excess capacity. The lack of visible excess capacity (oil that can be quickly and sustainably returned to the market) will create a scarcity premium that could overwhelm the current market sentiment that US production can respond quickly to balance the market.
EIA released Feb’16 US oil production which indicated total US supply declined 51kbpd m/m and is 322kbpd lower y/y. Onshore L-48 monthly decline of 23kbpd was shallower than recent months with a 26kbpd uptick in New Mexico (assuming a reversal of the weather-related decline in Dec ’15). Feb’16 L-48 onshore production is down 414kbpd y/y. Bottom line – declines are happening now and with rig count struggling, the declines will continue through year-end and likely well into 2017.
At our luncheon in Houston on April 25, Raymond James said WTI should by $50 by end of June and reach $70 by end of Q3.
The presentation slides that Raymond James spoke from are available on our website.