Energy Prospectus

The front month NYMEX contract for WTI closed at $51.94 on Friday, up $1.04 on the day. WTI remains under pressure from the rising U.S. dollar.

IEA: Oil demand in 2017 to slow. In its latest Oil Market Report, the IEA said that global oil demand growth will slow to just 1.3 mb/d next year, down from 1.4 mb/d this year and 1.9 mb/d in 2015. The growth rate will be the smallest since 2014 and it poses a threat to a market on the mend. Other analysts put the 2017 growth rate much lower – Citigroup thinks demand will only expand by an unimpressive 1.1 mb/d.

OECD commercial inventories fell in October for the third month in a row. They have drawn 75 million barrels since reaching a historical high in July, but remain 300 million barrels above the five-year average. Refined product stocks have fallen twice as quickly as crude during that period. Preliminary data show stocks falling further across the OECD in November.

Summary of IEA Oil Market Report here: https://www.iea.org/oilmarketreport/omrpublic/

Goldman Sachs increases oil price forecast. Goldman Sachs issued a revised oil price forecast for 2017 to reflect the effects of the non-OPEC agreement and greater confidence in the compliance of OPEC members to their historic deal. The investment banks expects WTI to average $57.50 in the second quarter of next year, up from its previous estimate of $55. Brent will average $59 instead of $56.50. Goldman is assuming an 84 percent compliance rate from OPEC, which will lead to cuts of 1.6 mb/d from the cartel instead of the announced 1.8 mb/d.

Pioneer expects $70 oil. While Goldman Sachs is offering a sort of middle-of-the-road forecast on oil prices – not too bullish or bearish – Pioneer Natural Resources (NYSE: PXD) is a lot more optimistic. The Texas shale driller sees WTI rising to $70 per barrel by the end of 2017 as the world quickly draws down on storage levels. Pioneer’s COO Tim Dove told Bloomberg that his company has hedged 85 percent of its production through 2017, but has declined to hedge much for 2018 as it plans on profiting from much higher prices. “We haven’t done much hedging for just that reason," Dove said. “We think there’s a chance that ’18 can be better."

FWIW: I get a weekly newsletter from the Middle East. Over the years it has been accurate. Today they predicted that the Trump Team is going to rip up Obama's Iranian Nuke deal and impose new sanctions on Iran. They say General Mike Flynn has already drafted the revamped nuclear accord and that it will be presented to Iran as non-negotiable. They also say that Russia is willing to work with the U.S. on this because they want to crush ISIS as much as we do and play a part in the Middle East. Russia will also gain from the spike in oil prices that will surely follow new sanctions against Iran.

“Vladimir Putin is the only world leader whose cooperation Trump may seek for getting his Iran policy on track – hence the usefulness of Rex Tillerson as Secretary of State. The proposition he will be asked to put before Putin is roughly this: If Moscow has an interest in cooperating with Washington in the Middle East and other parts of the world, then the Russian President must not only sign off on Trump’s Iran policy, but also take a hand in its execution.” Russian has more influence over Iran than we do.

My opinion: The days of the weak Obama administration are over. Changes are certainly in store for all of the Federal agencies dealing with the Middle East.

ISIS has killed over 200,000 people and cause millions more to leave their homes. Evil like this cannot be tolerated.