Crude oil supply-and-demand balance

The EIA (U.S. Energy Information Administration) estimates that crude oil supply could outstrip demand by 780,000 bpd (barrels per day) in 4Q16. To learn more, read What Does the EIA Think about Crude Supply and Demand Balance?

High crude oilgasoline, and distillate inventories as well as a strengthening dollar and a rising US crude oil rig count could limit the upside for crude oil prices.

World Bank Thinks OPEC Production Freeze Will Impact Crude Oil

World Bank crude oil price forecasts

The World Bank released its Commodity Markets Outlook report on October 20, 2016. It reported that OPEC (Organization of the Petroleum Exporting Counties) members may cap their crude oil production in the coming months. For more on oil producers and the OPEC meeting, read Part 4 of this series. This would boost crude oil prices in the coming months and in 2017.

As a result, the World Bank upgraded its Brent crude oil price forecast to $55 per barrel from $53 per barrel in 2017. It also added that Brent crude oil prices will average $43 per barrel in 2016.

EIA’s crude oil price forecasts

The EIA estimates that US WTI (West Texas Intermediate) crude oil prices will average $42.78 per barrel in 2016 and $49.99 per barrel in 2017. It also estimates that Brent crude oil prices will average $43.43 per barrel in 2016 and $50.99 per barrel in 2017. WTI and Brent crude oil prices averaged $48.67 per barrel and $52.32 per barrel, respectively, in 2015.

Impact on ETFs and stocks

The roller coaster ride in crude oil prices can impact the earnings of oil and gas producers such as Cobalt International Energy (CIE), Goodrich Petroleum (GDP), Triangle Petroleum (TPLM), and QEP Resources (QEP).

Crude oil prices also impact funds such as the ProShares UltraShort Bloomberg Crude Oil (SCO), the ProShares Ultra Bloomberg Crude Oil (UCO), the Fidelity MSCI Energy ETF (FENY), 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. 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.

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