More draws predicted for late 2017, 2018
The oil market rebalancing is in progress, even if it is slower than expected, according to releases by Societe Generale and RBC Capital Markets.
When OPEC first agreed to cut production in November, analysts were hoping that six months of reduced production would be enough to rebalance the oil market and draw down inventories.
However, according to Societe Generale OECD crude and product stocks at the end of April were 56 MM barrels higher than at the end of December. OPEC was essentially forced to continue cuts, which were agreed to in late May.
Societe Generale reports that if cut compliance is maintained, oil stocks will begin to decrease in the rest of the year. Global oil demand is projected to grow by 1.3 MMBOPD this year and in 2018. This increased demand, combined with decreased output from OPEC, means that the implied drawdown is 0.6 MMBOPD in 2017 and 0.5 MMBOPD in 2018.
Both years will see most drawdowns in the second half of the year.
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Both firms have decreased their predicted oil prices as a result of the slow drawdown on global inventories. Societe Generale expects WTI to average $53.80 in 2017 and $57.50 in 2018. RBC sees similar WTI prices, predicting $53/bbl in 2017 and $59/bbl in 2018.
After this, prices will rise over the next few years to $75/bbl, as the need for investment in major projects requires increased pricing, according to Societe Generale’s analysis.
makati1 on Tue, 6th Jun 2017 8:03 pm
“Is $75 Oil Still Possible?”
Answer: Only until it crashes the economy and ends the Age of Petroleum forever. OR … if inflation runs rampant and $75 is the price of a loaf of bread. Either way it is over.
joe on Wed, 7th Jun 2017 1:10 am
Of course it’s possible, anything is possible, $500 oil is possible, why not. Collapse in the middle east could happen, certainly the situation is increasing critical, does anyone think a war with Iran and Saudi will have a positive outcome for oil?
rockman on Wed, 7th Jun 2017 9:40 am
Predictions are difficult…especially about the future. In 1998 when oil was less the $20/bbl few thought $45/bbl was possible. LOL.
dooma on Thu, 8th Jun 2017 3:28 am
So you are saying that all we can predict is that things are going to be unpredictable? 😉
Cloggie on Thu, 8th Jun 2017 3:49 am
The enormous potential of offshore wind:
https://deepresource.wordpress.com/2017/06/08/gemini-wind-farm-live-data/
Take that, doomers.lol!
spike on Thu, 8th Jun 2017 5:43 am
It’s important to remember that short-term prices can fluctuate wildly, depending on events that are less relevant in the long-term. http://www.insidesources.com/long-term-oil-prices-not-as-mysterious-as-thought/
Question is not: is $75 possible, but is it sustainable for any length of time (and how, if so). Mike