Crude oil supply and demand
Goldman Sachs (GS) expects the crude oil supply and demand gap will narrow due to supply outages in 2016. The EIA (U.S. Energy Information Administration) and the International Energy Agency estimate that the global oversupply of crude oil will diminish in 2016. Read Will Crude Oil’s Supply and Demand Balance Narrow or Widen? to learn more.
Crude oil price forecast
Leading Nordic bank SEB raised its Brent crude oil forecast to $48 per barrel for 2016 compared to its previous forecast of $44 per barrel. It also raised its Brent crude oil price forecast to $55 per barrel from $50 for 2017.
Raymond James & Associates estimates that WTI (West Texas Intermediate) crude oil prices will average $80 per barrel by the end of 2017. Slowing US crude oil production and recent supply outages should support crude oil prices. The decline in crude oil production in China, Colombia, Angola, and Mexico will also support crude oil prices in 2016 and 2017. The EIA estimates that Brent crude oil prices will average $40.52 per barrel in 2016 and $50.65 per barrel in 2017. WTI crude oil prices are expected to average $40.32 per barrel in 2016 and $50.65 in 2017.
However, most of these forecasts are at risk after the Brexit vote. A stronger dollar and a global risk-off mood after the vote could influence crude oil prices. BNP Paribas predicts that Brent crude oil prices could trade between $35 and $40 per barrel in 2016 due to a stronger dollar, oversupply, and near-record US crude oil inventories.
The uncertainty in crude oil prices impacts oil and gas producers such as Range Resources (RRC), Stone Energy (SGY), Halcón Resources (HK), and Sanchez Energy (SN). It also impacts ETFs and ETNs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the ProShares Ultra Bloomberg Crude Oil ETF (UCO), and the PowerShares DWA Energy Momentum Portfolio (PXI).
For related analysis, visit Market Realist’s Energy and Power page.