Barclays expects higher oil prices in Q2
On March 28, Barclays wrote in a note that it expects Brent crude oil and US crude oil to average around $73 and $65 per barrel in the second quarter of 2019. At those levels, US crude oil and Brent crude oil prices would be 18.4% and 14.4% higher than their average closing prices in Q1 2019 so far. Moreover, the company expects that OPEC and Russia will continue with their agreed-upon supply cuts even beyond June 2019. Again, based on Barclays’ price expectation, the Brent-WTI spread will contract in Q2 2019, a factor that might limit US crude oil exports’ rise.
However, news reports suggest that Russia is reluctant to extend production cuts at the June meeting. On March 29, a Reuters poll suggested that analysts expect OPEC and non-OPEC members’ supply cuts along with US sanctions on Iran and Venezuela will mitigate the risk from US oil production and the slowing global economy.
Moreover, if US crude oil averages around the $65 level in the next quarter, it would boost upstream stocks like Concho Resources (CXO), Noble Energy (NBL), and others. A rise in US upstream stocks will also benefit US equity indexes like the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA).