13 Jan

Will 2017 or 2018 Mark the Return of the Bulls?

WRITTEN BY Gordon Kristopher

Crude oil supply and demand 

The EIA (U.S. Energy Information and Administration) published its monthly STEO (Short-Term Energy Outlook) report on January 12, 2016. It reported that the global crude oil production will rise to 95.9 MMbpd (million barrels per day) in 2016 and 96.7 MMbpd in 2017. The global crude oil production was at 95.7 MMbpd of crude oil in 2015. The global oil consumption is expected to average 95.2 MMbpd in 2016 and 96.6 MMbpd in 2017.

Will 2017 or 2018 Mark the Return of the Bulls?

US crude oil production 

The EIA reported that US production could fall to 8.7 MMbpd in 2016 and 8.5 MMbpd in 2017. The US produced 9.4 MMbpd of crude oil in 2015. Slowing US production could benefit crude oil prices.

Crude oil supply and demand gap 

Slowing US production could narrow the supply and demand gap in 2016 and 2017. However, record production from OPEC  and scaling Iran’s production could balance the oil market. How long? The EIA expects the crude oil supply and demand gap to be around 0.8 MMbpd in 2017. Speculation of an improving Chinese economy and improving demand in 2017 are key catalysts for higher oil prices in 2017 and 2018.

Lower oil prices benefit US refiners like Phillips 66 (PSX), Tesoro (TSO), and Valero Energy (VLO). In contrast, higher crude oil prices benefit producers like Anadarko Petroleum (APC), ConocoPhillips (COP), Oasis Petroleum (OAS), and EOG Resources (EOG). Oil producers like Whiting Petroleum (WLL) and Newfield Exploration (NFX) got a credit upgrade from Wells Fargo despite the depressed energy market. These companies would outperform when oil prices rebound.

The volatility in oil prices impacts ETFs and ETNs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Vanguard Energy ETF (VDE), and the VelocityShares 3x Long Crude Oil ETN (UWTI).

Read the next part of the series for the latest crude oil price forecast.

Latest articles

19 Jul

Afya's IPO Sees Strong Listing Gains

WRITTEN BY Mohit Oberoi, CFA

Afya (AFYA) listed on the Nasdaq Global Select Market on July 19. The company priced its IPO at $19 per share.

19 Jul

What to Watch For in Amazon's Q2 Earnings

WRITTEN BY Sanmit Amin

e-Commerce giant Amazon (AMZN) is scheduled to report its second-quarter earnings results after the closing bell on July 25.

19 Jul

Barrick Gold Reaches Deal to Buy Acacia Mining

WRITTEN BY Anuradha Garg

After a long standoff, Barrick Gold (GOLD) and Acacia Mining (ABGLF) have reached an agreement.

19 Jul

Comcast Shares Pop on Goldman's Optimism

WRITTEN BY Ruchi Gupta

Comcast (CMCSA) shares popped after Goldman Sachs issued a positive note on the company recently. Goldman upgraded its rating for Comcast to "buy" from "hold."

19 Jul

Why Analysts Are Bearish on Netflix Stock

WRITTEN BY Aditya Raghunath

Netflix stock fell over 10.0% on Thursday and is down 0.5% today as well.

On Thursday, pet retailer Chewy (CHWY) reported its first-quarter results after the market closed. The company reported its earnings for the first time.