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Standard & Poor’s Revised Its Forecast for US Crude Oil Prices

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Supply and demand gap  

High crude oilgasoline, and distillate inventories, as well as high OPEC and Russian crude oil production could pressure crude oil prices. However, lower crude oil prices could help narrow the supply and demand imbalance. Read Will Crude Oil Supply and Demand Balance in 2017? to learn more.

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Crude oil price forecasts 

International rating agency Standard & Poor’s expects US crude oil prices to average $42.50 per barrel for the rest of 2016. Previously, it estimated that US crude oil prices would average $40 per barrel. Standard & Poor’s expects that improving crude oil demand growth will support crude oil prices. It also added that crude oil oversupply will exist until 2017.

Supply disruptions due to pipeline damage could support crude oil prices in the short term. Market research company Frost and Sullivan estimates that US crude oil prices could trade between $40 per barrel and $45 per barrel in the short term.

The EIA (U.S. Energy Information Administration) estimates that US crude oil prices will average $41.92 per barrel in 2016 and $50.58 per barrel in 2017. It also estimates that Brent crude oil prices will average $42.54 per barrel in 2016 and $51.58 per barrel in 2017.

Impact on ETFs and stocks  

The rollercoaster ride in crude oil prices impacts oil and gas producers’ earnings like Cobalt International Energy (CIE) and Warren Resources (WRES).

Prices also impact funds such as the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Fidelity MSCI Energy (FENY), the DB Crude Oil Double Short ETN (DTO), the Direxion Daily Energy Bear 3x (ERY), the VelocityShares 3x Inverse Crude Oil ETN (DWTI), and the PowerShares DWA Energy Momentum ETF (PXI).

For more on crude oil prices, read Saudi Arabia: Weather Will Be a Key Demand Driver of Oil in 2H16. Read Will Crude Oil Prices Test 3 Digits Again? for more on crude oil price forecasts.

For related analysis, visit Market Realist’s Energy and Power page.

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