Oil Price Forecast - Wells Fargo

[dan_s]

Well's Fargo's Equity Research Team sent me a report dated September 9, 2016. Here is their official view on oil prices.

"We reiterate our view that oil prices should average $50 per barrel (bbl) by Q4 2016 and exceed $50/bbl by year’s end. In 2017 prices should move above $60/bbl as inventories begin to meaningfully decline. In our opinion, it is getting easier to be fundamentally bullish about the absolute level and direction of oil prices. Following the acknowledgement of a Saudi Arabia/Russia cooperation pact, increased and public discussions of a joint OPEC/non-OPEC production freeze (Algeria Sept 26-28) have gained credence – though Iran has most recently tossed some cold (or should we say hot) water in that direction. In our view, this talk reflects the reality on the ground that more and more countries are producing at or close to their available capacities and thus standing pat becomes more defensible. If the global oil market is achieving a balanced condition then the oil price recovery remains in its early stages and should gain steam through the end of 2016 and into 2017. Our new/old WTI per barrel (bbl) oil price forecast for 2016-2019 are $43.29/$45.29, $57.25/$57.50, $60/$60 and $61/$60. Our new/old Brent per bbl forecasts for 2016-2019 are $44.91/$46.79, $58.50/$58.75, $62/$62 and $64/$63. We are initiating new per bbl WTI and Brent oil prices for 2020 of $60 and $63, respectively."

In my opinion, the longer oil stays under $50/bbl, the higher it will go in 2017. I believe this past summer's increase in the active rig count is all the increase we will see this year, unless oil moves over $50/bbl. Boards of the upstream companies do not want to get over extended again. - Dan