EIA and Goldman Sachs Upgrade Crude Oil Price Forecasts
Donald Trump’s victory, the strengthening dollar, rising US crude oil rigs, and high crude oil, gasoline, and distillate inventories could limit the upside for crude oil (BNO) (ERY) (PXI) (USL) (USO) (UCO) prices. For more on crude oil prices, read Federal Reserve and US Inventories Impact Crude Oil Prices. For more on crude oil rigs, read the previous part of the series.
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Goldman Sachs (GS) expects that successful implementation of OPEC (Organization of the Oil Exporting Countries) and non-OPEC producers’ plan to cut crude oil production will reduce the oversupply in the market and support crude oil prices.
Goldman Sachs expects Brent crude oil to average $58 per barrel in 2H17—compared to its previous forecast of $51.50 per barrel. Likewise, it expects WTI crude oil prices to average $57.50 per barrel for the same period.
However, the successful implementation of Donald Trump’s energy policies would lead to a rise in US crude oil production. The rise in non-OPEC production in 2017 would also pressure crude oil prices. Read How Does Non-OPEC Crude Oil Production Impact Crude Oil Prices? to learn more.
Crude oil price forecasts
A Wall Street Journal survey of major banks predicts that US and Brent crude oil prices will average $54 per barrel and $56 per barrel in 2017, respectively.
EIA’s crude oil price forecast
The EIA (U.S. Energy Information Administration) estimates that US and Brent crude oil prices will average $51 per barrel and $52 per barrel, respectively, in 2017. It’s $1 per barrel more than the previous estimates. The EIA upgraded the crude oil price forecast due to the expectation of a reduction in crude oil production from OPEC producers.
Impact on ETFs and stocks
Uncertainty in crude oil prices can impact oil and gas producers’ earnings such as Goodrich Petroleum (GDP), Marathon Oil (MRO), Chevron (CVX), Cobalt International Energy (CIE), and QEP Resources (QEP).
Volatility in crude oil prices also impacts funds such as the ProShares UltraShort Bloomberg Crude Oil (SCO), the DB Crude Oil Double Short ETN (DTO), the Direxion Daily Energy Bull 3x ETF (ERX), the iShares US Energy (IYE), and the Fidelity MSCI Energy ETF (FENY).
For more on crude oil prices, read Saudi Arabia: Weather Will Be a Key Demand Driver of Oil in 2H16 and Winners and Losers in Energy after the US Election Results.
For more on crude oil price forecasts, read Will Crude Oil Prices Test 3 Digits Again? and Major Banks Downgrade Crude Oil Prices despite OPEC’s Deal.
For related analysis, visit Market Realist’s Energy and Power page.