Energy Prospectus

Crude oil prices drifted higher in Asia on Monday with most financial markets in the region closed to mark the New Year holiday.

Crude for February delivery on the New York Mercantile Exchange rose 0.24% to $53.90 a barrel. Global benchmark Brent crude traded on London's Intercontinental Exchange was last quoted at $56.74 a barrel.

Investors (speculators that set the daily price) will be "guessing" all month on which countries will adherence to combined production cuts by OPEC and non-OPEC nations near 1.8 million barrels per day that started at the New Year. A meeting in Kuwait later this month will assess progress.

I am expecting Saudi Arabia, Kuwait and UAE to announce significant export cuts early in January.

I get several investment newsletter. One I got today said the technicals show oil moving to $60-$80, but it might drop to $35. Now, there is a BOLD prediction that someone can invest on!

I believe most of the OPEC countries will comply with their agreement to cut production by 1.2 million barrels per day. It is definitely in their best interest to do so. Cuts by Russia and the other Non-OPEC countries are questionable, so don't count on those. However, it is in their best interest to make some effort to cut production. If cuts over a million barrels per day are confirmed, oil should move to $60 within a few months.

Oil demand will go up 1.0 to 1.5 million barrels per day in 2017. Most of the increase will come in the 3rd quarter, like it does every year. Go to the IEA Oil Market Report at this link and you will notice how demand spikes each summer: https://www.iea.org/oilmarketreport/omrpublic/

U.S. production will go up 300,000 to 500,000 barrels per day this year, with most of it coming from the Permian Basin and SCOOP/STACK. If oil prices spike to $70/Bbl this summer (possible), I don't think we'll see a significant supply response until 2018.