Supply and demand balance
The IEA (International Energy Agency) estimates that the crude oil market is closer to balancing in 2H16. However, high crude oil and product inventories weigh on the crude oil market. Read Supply and Demand Gap: Will It Benefit or Pressure Crude Oil Prices? to learn more.
Crude oil price forecast
On July 26, 2016, the World Bank forecasted that Brent and WTI will average $43 per barrel in 2016, up from the previous estimates of $41 per barrel for the same period. Crude oil prices will trade higher due to crude oil supply outages and higher crude oil demand in 2Q16.
Ritterbusch & Associates forecasts that crude oil prices could decline by $4 per barrel from levels of $41–$42 per barrel in the next few weeks.
US gasoline supplies are at the highest level for this time of the year in decades. However, high seasonal supplies will lead to much earlier maintenance of US refineries. This will lead to seasonal weakness in demand for US crude oil and put pressure on crude oil prices. Scheduled refinery maintenance by the US and China could pressure crude oil prices.
The strong US dollar and weak demand cues from Japan and Europe will also pressure crude oil prices.
BNP Paribas and JBC Energy estimated that Brent crude oil could test as low as $40 per barrel in 2016 due to seasonal demand weakness. Barclays projects that Brent crude oil prices will trade as low as $40 per barrel due to the Brexit vote in 2016. Goldman Sachs estimates that WTI crude oil might trade between $45 and $50 per barrel over the next 12 months.
The ups and downs in crude oil prices impact the earnings of oil and gas producers like Stone Energy (SGY), Comstock Resources (CRK), and Sanchez Energy (SN). They also impact funds such as the United States 12 Month Oil ETF (USL), the iShares U.S. Oil Equipment & Services ETF (IEZ), and the PowerShares DWA Energy Momentum ETF (PXI).
For related analysis, visit Market Realist’s Energy and Power page.