Jim Rogers and the US election
Jim Rogers expects that Donald Trump will win the US presidential election in 2016. It suggests that US oil and gas drilling activity could increase. These sentiments would pressure crude oil prices in the short term. Crude oil prices fell 13% from recent highs. They’re trading near one-month lows. For more on crude oil prices, read Part 1 and Part 3 of this series.
Jim Rogers thinks that if Trump wins, the US “might see bankruptcy and trade wars.” On the other hand, if Clinton wins, the US “might see bankruptcy and trade wars at a much slower pace.” Read How Could Donald Trump Impact the US Energy Market? and How Could Hillary Clinton Impact the US Energy Market? to learn more.
Supply and demand balance
The EIA (U.S. Energy Information Administration) estimates that the crude oil supply could outstrip demand by 780,000 bpd (barrels per day) in 4Q16. High US crude oil, gasoline, distillate inventories, the strengthening dollar, and rising US crude oil rigs could also pressure crude oil prices.
Trader’s pessimism about OPEC’s (Organization of the Petroleum Exporting Countries) plan to cap production will also pressure crude oil prices. Goldman Sachs (GS) expects that the failure of OPEC’s meeting could see US crude oil prices test $40 per barrel in the short term. Read OPEC’s Crude Oil Production Rises despite OPEC’s Historic Deal to learn more.
Crude oil price forecast
The EIA estimates that US WTI (West Texas Intermediate) crude oil prices will average $47 per barrel in November 2016 and December 2016.
SAXO Bank estimates that Brent crude oil prices will trade between $48.4 per barrel and $49.4 per barrel in the short term.
A Wall Street Journal survey from major banks predicts that Brent crude oil prices will average $56 per barrel in 2017. US crude oil prices will average $54 per barrel in 2017.
Impact on ETFs and stocks
The rollercoaster ride in crude oil prices can impact oil and gas producers’ earnings such as Marathon Oil (MRO), ConocoPhillips (COP), Northern Oil & Gas (NOG), Cobalt International Energy (CIE), Goodrich Petroleum (GDP), and QEP Resources (QEP).
Volatility in crude oil prices also impacts funds such as the ProShares UltraShort Bloomberg Crude Oil (SCO), the iShares US Energy (IYE), the ProShares Ultra Bloomberg Crude Oil (UCO), the Fidelity MSCI Energy ETF (FENY), the Direxion Daily Energy Bear 3x ETF (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. 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.