Oil Prices - Sept. 22

[dan_s]

Credit Suisse Global Energy Team said this on 9-9-2016: "Our expectation for a mid-2016 rebalance (of oil supply/demand) has begun to play out. Starved of revenue, the industry and many sovereigns have had to cut back upstream activity sharply. Oil production is falling in most places. Supply declines have swung the balance into deficit in the third quarter, say our models. We still think that timing and errors at the margins of supply and demand are to blame for reported-inventory not falling much (if at all), and for some highly visible stocks (e.g. crude oil in the US) rising well into August. We could be wrong about demand & supply trajectories of course, but the data have not forced a rethink … and even our balances put most of the Q3 stock draw into September."

Note that since Credit Suisse put this report together, we have seen 3 rather significant declines in U.S. crude oil storage. The first week can be blamed on weather, but the next two look very much to me like EIA corrections of their weekly "Wild Ass Guesses" to reality. [Over the years I have seen EIA make "corrections to actuals" without really telling us that they found a flaw in their weekly estimates, which are reported each week as if they are gospel truth. Believe me, they are nothing more than WAG's based on flawed formulas.]

Credit Suisse's global data shows draws from worldwide storage should be 1.5 MMBbls/day in both September and October. They show draws continuing through 2017. Keep in mind that the Credit Suisse Energy Team is tracking supply/demand for all countries.

WTI has moved up $2.75/bbl since the EIA oil storage report came out yesterday. If they report another decline in storage next week, we should break $50/Bbl. If OPEC actually comes out with some type of plan to curb production next week, oil will move even higher. There is VERY STRONG resistance at $50.

Credit Suisse's oil price forecast:
> WTI stays in $45 to $50 range through year-end
> WTI ramps to $55 by end of Q2 2017
> WTI moves to $60 to $65 range sometime during 2H 2017
> Their SWAG is $65 for both 2018 & 2019 with bias to the upside