Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

The Bullish And Bearish Case For Oil Prices

Commodities / Crude Oil Apr 18, 2018 - 12:01 PM GMT

By: OilPrice_Com

Commodities

Oil prices could rise due to the “perfect storm of stagnant supply, geopolitical risk, and a harsh winter,” according to an April 12 note from Barclays.

Geopolitical events specifically could help keep Brent above $70 through April and May, which comes on the back of a substantial decline in oil inventories.


The investment bank significantly tightened its forecast for Venezuelan production, lowering it to 1.1-1.2 million barrels per day (mb/d), down sharply from its previous forecast of 1.4 mb/d. That helped guide the bank’s upward revision for its price forecast for both WTI and Brent in 2018 and 2019, a boost of $3 per barrel.

The flip side is that the explosive growth of U.S. shale keeps the market well supplied, and ultimately forces a downward price correction in the second half of the year, Barclays says. In fact, the investment bank said there are several factors that could conspire to kill off the recent rally. One of the looming supply risks is the potential confrontation between the U.S. and Iran. The re-implementation of sanctions threatens to cut off some 400,000 to 500,000 bpd of Iranian supply.

But Barclays says these concerns are “misguided,” with the risk overblown. “Yes, it should kill the prospects for medium-term oil investment, and yes it could destabilize the region further, but we struggle to accept a narrative that the market had been expecting big gains in Iranian output over the next several years anyway.” Moreover, the ongoing losses from Venezuela are also broadly accepted by most analysts. “Therefore, it is worth suggesting that in both of these countries, a dire scenario may already be priced in,” Barclays wrote.

Ultimately, the current price levels could be “as good as it gets,” Barclays argues. The bank forecasts Brent will average $63 per barrel this year and only $60 per barrel in 2019.

However, Goldman Sachs is way more bullish, noting that the sudden spike in geopolitical tension only “reinforces” its prediction of a 10 percent increase in commodity prices over the next 12 months. With the potential for inflation, the backwardation in the oil futures curve, and supply risks from geopolitical instability, “the strategic case for owning commodities has rarely been stronger,” Goldman analysts wrote last week.

Goldman also cited the recent attacks on Saudi oil facilities, a development that would normally frighten oil traders but these days arguably doesn’t even rank in the top 5 in terms of supply risks. Iran-backed Houthi rebels in Yemen have targeted Aramco facilities and an oil tanker, although none have succeeded in disrupting supply.

Ultimately, Goldman believes there won’t be a major loss of supply to the market unless a broader Saudi-Iran conflict erupts. “Nonetheless, as we have argued in the past, with low and declining inventories the market remains vulnerable to even small disruptions,” the bank wrote.

While Barclays believes the risk of a disruption of Iranian supply is overblown, Goldman Sachs has a more nuanced take. U.S. sanctions could force European refiners to reduce their purchases of Iranian oil, but the real question is if Iranian oil is simply rerouted to Asia or if Iran is forced to incur cutbacks. The effectiveness of U.S. sanctions on shipping insurance might be the key to answering this question. In any event, Goldman says that a hypothetical 500,000-bpd loss of Iranian supply could result in a price increase of $7 per barrel. From there, the question is whether or not Saudi Arabia steps up production to compensate, which would blunt the price impact.

uch of the motivation comes from Saudi Arabia, OPEC’s most influential member, who reportedly wants $80 per barrel to bolster the valuation of Saudi Aramco.

The risk to the oil market is that OPEC allows the supply balances to tighten too much, draining inventories far below what it had anticipated. “If OPEC does not begin to compensate for the non-fundamental drivers of the oil price by using its own relief valve of higher output, it may find the market shifts structurally before it has time to react,” Barclays wrote in a note.

By Nick Cunningham of Oilprice.com

Link to original article: https://oilprice.com/Energy/Energy-General/The-Bullish-And-Bearish-Case-For-Oil.html

OilPrice.com Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules