Energy Stat of the Week by J. Marshall Adkins

Energy Stat: Oil Model More Bullish With OPEC Cut Extension; Is Our $65/Bbl Forecast Now Too Low?

December 4, 2017

Over the past few months, the oil market has finally started figuring out what we’ve been pointing out throughout the year: With oil prices near $50/Bbl, global oil markets are meaningfully undersupplied, oil inventories are falling sharply, and oil prices must move higher to re-balance the system. Much of our bullishness has been due to the fact that (with oil prices around $50) global oil demand is surging and U.S. shale simply can’t grow as much as consensus believes. That said, the OPEC coalition production cuts initiated in January 2017 have clearly helped clear up some of the global oil inventory overhang. Furthermore, now that a nine-month OPEC coalition cut extension has been confirmed through year-end 2018, much of the near-term oil market uncertainty has been lifted from investor sentiment.