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Page added on January 13, 2018

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Oil Could Hit $80 a Barrel This Year

Consumption

Tightening global supplies and rising demand for crude oil helped prices for the commodity start the year with a bang—hitting their highest levels in more than three years—and many analysts believe the market has the fuel it needs to continue the rally to as high as $80 a barrel.

“The reason that oil will soar is the oldest story in the oil world: Low prices created strong demand and growth, and now that demand is leading the way,” says Phil Flynn, senior market analyst at Price Futures Group.

Oil futures suffered hefty declines in 2014 and 2015, as a global glut in supplies and the Organization of Petroleum Exporting Countries’ unwillingness to significantly curb production amid fear of market-share loss sliced the per barrel oil price roughly in half.

On Friday, it notched its highest levels since December 2014, with West Texas Intermediate crude, the U.S. benchmark, settling at $64.30 a barrel on the New York Mercantile Exchange and global benchmark Brent crude ending at $69.87 on the ICE Futures Europe exchange.

Flynn expects WTI oil prices to average $67 in 2018, and says they will probably spend some time trading over $70. If OPEC keeps its crude production-cut deal till the end of this year, WTI prices could hit $80 a barrel, he says.

U.S. crude supplies have fallen for eight weeks in a row, for a total drop of more than 39 million barrels, according to the Energy Information Administration. That marks the “biggest drop in history in the shortest amount of time,” says Flynn, a “sure sign that the U.S. oil market is in deficit versus demand.”

The International Energy Agency pegged average 2017 global oil demand at 97.8 million barrels a day, up 1.6% from 2016, according to a report released in mid-December. It showed that global oil supply in November also stood at 97.8 million barrels a day, down 1.1 million barrels a day from a year earlier. The IEA forecasts a further rise in 2019 demand to 99.1 million barrels.

Global demand is rising by over one million barrels a day per year, more “than offsetting incremental production from U.S. shale producers,” says Jay Hatfield, co-founder of Infrastructure Capital Management.

He expects “robust global demand,” on strong economic growth, to drive oil prices higher this year, forecasting WTI oil prices in the $60 to $70 range during 2018, “with risk to the high side.” Higher prices may bring good returns for oil stocks and master limited partnerships, too, he says.

In recent weeks, geopolitical factors have added support to oil prices, with unrest in Iran, OPEC’s third-largest crude producer, and a crisis in Venezuela threatening output.

Oil Could Hit $80 a Barrel This Year

BUT ANALYSTS POINT OUT some potential headwinds for prices. It’s fair to say that “too high a price will equal too much oil,” says Denton Cinquegrana, chief oil analyst at the Oil Price Information Service. Cooperation with the output cuts has been “incredible,” he says, with the final quarter of 2017 seeing a nearly 100% compliance rate, according to the EIA. But “the temptation to cheat” may increase along with prices, Cinquegrana says.

Non-OPEC producers, particularly Russia, which participates in the output deal, and the U.S., which does not, are key. “Russia and other oil producers, including the Gulf countries, have re-initiated investment in their oil sectors, and that will lead to increased output down the line, which will surely affect prices,” says Omar Al-Ubaydli, a program director at the Bahrain Center for Strategic, International and Energy Studies.

Meanwhile, “shale remains an enigma; rig counts are in a perpetual game of cat-and-mouse with conventional oil,” he says, with shale oil costs expected to start rising sharply “once they have extracted all of the low-hanging fruit.”

The Trump administration’s plan to open up more U.S. offshore areas to oil and natural-gas drilling as part of a five-year plan may also pressure prices.

The focus for investors could return to the “growing supply led by increasing oil production, rising exports, and potential drilling-friendly policies in the U.S.,” says Maxwell Gold, director of investment strategy at ETF Securities. Those factors may “see the oil price fall back down to $45-to-$60 a barrel within the first half of 2018.” But “further market rebalancing coupled with rising inflation expectations and a tepid U.S. dollar could help prices find stability within the second half of the year,” he says.

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37 Comments on "Oil Could Hit $80 a Barrel This Year"

  1. joe on Sat, 13th Jan 2018 7:45 am 

    Up and down on the bumpy plateau. We saw this movie in 2007, its called ‘reasons to increase interest rates’. This could be part two, we find out if Obamas TARP programme w as really worth it. It will be if we can just keep robbing whitey of his power, I hate that blue eyed devil. All hail President O……!
    I wonder if one day God will punish all those who lied to get America into Iraq. Bush is still looking for those WMDs, he thinks his friends in the the Bin Laden group his them in the ranch in Texas as a joke.

  2. Roger on Sat, 13th Jan 2018 9:51 am 

    If,
    This is even close to true:

    “Venezuela Dec oil flow off 151,000 b/d: officials” http://www.argusmedia.com/news/article/?id=1603657

    And If,

    It continues…say, for 6 or 8 more months

    Then,
    US shale production is irrelevant…
    OPEC cuts are irrelevant…
    And,
    Oil will be > $100/bbl.

    End

  3. Cloggie on Sat, 13th Jan 2018 10:08 am 

    $100 would be even better. Would increase the pressure to move into renewables.

    Lots of renewable electricity in Germany in week 1:

    https://www.energy-charts.de/power.htm?source=all-sources&week=1&year=2018

  4. rockman on Sat, 13th Jan 2018 10:53 am 

    “Flynn expects WTI oil prices to average $67 in 2018”. Obviously Mr. Flynn doesn’t know what he’s talking about. A $67/bbl 2018 average is about 50% higher then what THE model says it will be. It’s equally obvious that the current price will plunge any day now to deliver the low $40/bb

  5. MASTERMIND on Sat, 13th Jan 2018 10:53 am 

    You think the global economy can handle 100 dollar oil in a depression? i think not!

    Global Economic Growth GDP Per Capita (1.3%)
    https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG

    World Governments Gross Debt to GDP (330%)
    https://imgur.com/a/3usX7

    https://www.brookings.edu/bpea-articles/causes-and-consequences-of-the-oil-shock-of-2007-08/

  6. Davy on Sat, 13th Jan 2018 10:59 am 

    Who says $100 would increase interest in renewables? Where did you get that economic insight? It is likely it will cause economic dislocations that will lower the global worlds ability to persue beneficial renewable investment. We are likely near a happy oil price range of $70ish. From here on out oil price needs to be amicable to both producers and consumers to benefit either. The global world is now a bubble and a wasteland of failing investments. We can now only accommodate small volatility without chasing the economy into risk off behavior of deflation and business failures.

  7. rockman on Sat, 13th Jan 2018 11:01 am 

    “…the low $40/bbl average the MAP predicts for 2018. Of course the longer prices stay in the $60/bbl range the price of oil will have to fall below $30/bbl for the second half of 2018 to yield a $41/bbl avg. for the year. So just put the current increasing price trend out of your mind: we’ll probably see prices start collapsing by next Monday afternoon. LOL.

  8. MASTERMIND on Sat, 13th Jan 2018 11:03 am 

    Dennis Meadows: “There is nothing that we can do”
    http://churchandstate.org.uk/2013/04/dennis-meadows-there-is-nothing-that-we-can-do/

  9. tommywantshismommy on Sat, 13th Jan 2018 11:08 am 

    And i thought it was going to be $20 a barrel. I wonder how the Trumpster will handle $100 oil..who will he blame? I’d imagine unleaded prices will be heading past the $3.00 mark anytime now.

  10. MASTERMIND on Sat, 13th Jan 2018 11:10 am 

    Rockman

    Shouldn’t you be backing up your comments with sources? And sorry the daily caller is not a credible source. Its obvious you never attended college.

  11. Outcast_Searcher on Sat, 13th Jan 2018 11:12 am 

    Mastermind — if you think the current global economy is a depression or is about to tip into a depression, that says all we need to know about the (lack of) credibility about your constant yammering about doom.

  12. MASTERMIND on Sat, 13th Jan 2018 11:14 am 

    Wal-Mart to Cut Thousands of Store-Management Roles
    https://www.bloomberg.com/news/articles/2018-01-12/wal-mart-said-to-restructure-store-roles-to-streamline-business

    Walmart is reportedly planning to cut over 1,000 corporate jobs
    https://www.cnbc.com/2018/01/12/walmart-is-reportedly-planning-to-cut-over-1000-corporate-jobs.html

    You know when Wal Mart starts to collapse. Then entire economy can’t be far behind! this is a canary in a coal mine!

  13. Outcast_Searcher on Sat, 13th Jan 2018 11:15 am 

    Tommy – all presidents (and politicians generally) say a lot of nonsense to get elected. So did Obama – did you bash him for all his broken promises?

    I’ve read several articles about how the president (by himself) doesn’t impact the economy that much, especially in the short run.

    Congress, OTOH, has a much larger impact via their power to legislate.

  14. MASTERMIND on Sat, 13th Jan 2018 11:18 am 

    Outcast

    Shows how little you know of history or economics. Depression means “Depressed Economic Growth”..

    The Great Depression 1929-1940 US Economic Growth GDP (1%)
    https://en.wikipedia.org/wiki/Great_Depression

    The Great Recession 2006-2017 US Economic Growth GDP (1.5%)
    https://www.statista.com/statistics/188165/annual-gdp-growth-of-the-united-states-since-1990/

    The Great Recession 2006-2017 US Economic Growth GDP Per Capita (0.4%)
    https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?locations=US

    OCED Economic Growth GDP Per Capita 1970-2015 (0.5%)
    https://imgur.com/a/HXBkr#Bv4I4AF

    Global Economic Growth GDP Per Capita (1.3%)
    https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG

    Non Partisan CBO Office Forecast Less Than 2% US Economic Growth GDP Through 2027
    https://www.cbo.gov/publication/52801

    *Note: 20% GDP Includes (FIRE) finance, insurance and real estate

    And these are numbers so if you or anyone else denies them you are arguing 2+2=5

  15. MASTERMIND on Sat, 13th Jan 2018 11:34 am 

    Outcast

    Alos the Nazi’s are back. Just like during the original great depression! History always repeats!

  16. print baby print on Sat, 13th Jan 2018 11:34 am 

    After the fiat currencies and gold contracts the most manipulated commodity in the market today is oil

  17. Davy on Sat, 13th Jan 2018 11:43 am 

    “Walmart is reportedly planning to cut over 1,000 corporate jobs. You know when Wal Mart starts to collapse. Then entire economy can’t be far behind! this is a canary in a coal mine!”

    Since when is cutting corporate jobs a sign of corporate collapse?? It is more likely a move related to the recent employee benefit increases and an attempt to pump stock prices.

  18. rockman on Sat, 13th Jan 2018 11:44 am 

    MM – “Shouldn’t you be backing up your comments with sources?” I did: I used the links you provided. As I said if someone takes the time to study them in detail they would see the error in your prediction of a “catastrophic decline” of the RESERVE BASE in the next few years. Lots of trouble down the road for the petroleum industry for sure. But not for the proved producing reserves which continue their documented slow decline. Documented by numerous DOOMERS on this very web site.

    So let’s hear from you doomers (and I use that term respectfully): how many of you anticipate our PROVED PRODUCING RESERVES declining at a rate of, let’s say, 20% per year for the next 3 years? I think such a decline rate would qualify as “catastrophic” as MM describes it.

  19. rockman on Sat, 13th Jan 2018 11:53 am 

    Yes indeed: when the stock of the largest retailer (Walmart) on the planet increases 48% in the last 12 months that’s a certain sign a global economic meltdown is just around the corner. Just amazing that the analysts on Wall Street are so blind to this realty. They should contact MM ASAP to straighten them out. LOL.

  20. Davy on Sat, 13th Jan 2018 11:54 am 

    “The US Economy: Full Steam Ahead?”
    https://tinyurl.com/yaxka8nw

    “Institute for Supply Management’s New Manufacturing Orders Index, a very useful leading indicator. At 69.4 last December, it is the highest reading going back all the way to January 2004, capping off growth in new orders for 16 consecutive months. Momentum is certainly on the way up here.”

    “Rail intermodal traffic registers the long-haul movement of shipping containers and truck trailers by rail whenever combined with (a much shorter) truck movement at one or both ends. It covers a broad range of goods that Americans consume regularly, from laptops to frozen chickens, and is thus a great indicator of how consumers are doing. Given the critical importance of consumption for the US economy as a whole, for us this is the most revealing category of all. The weekly evolution shows that after some hesitation last spring intermodal shipments picked up in earnest, setting new weekly records pretty much over the rest of the year. It’s full steam ahead here.”

    “But not everything is fantastic. The motor vehicles and parts graph shown above includes all sorts of vehicles (used and new), passenger car and bus bodies, parts and accessories and other related equipment. Readings in 2017 have fluctuated around the mid-point of the prior five years. On yearly basis this represented almost a 7% decline relative to 2016, the first negative print since the 2008 financial crisis.”

  21. peakyeast on Sat, 13th Jan 2018 12:37 pm 

    It does not seem likely that the producing fields decline 20% from depletion – even when taking into account enhanched recovery that produces the sharkfin curve instead. I can believe 7% on conventionals only about 2030 where I think the end of the plateau may be. However, I think there will be a lot of pain before we reach that state.

    The above ground factors can make any decline % come possible at any time – so no predictions about that.

    As the unconventionals increase their share of the total – their depletion rate could increase the overall % slightly if they are not renewed continously.

    To reach 20% per year for 3 years in a row there must be above ground factors that takes chunks out of production.

    Just my shooting from the hip opinion right now.

    You are free to ignore my advice since I may not be a real doomer.

  22. MASTERMIND on Sat, 13th Jan 2018 1:15 pm 

    Rockman

    Walmart stock and the stock market is being pumped up by corporate stock buy backs, quantitative easing, and ZIRP interest rates.

    https://imgur.com/a/1YXVJ

    https://nypost.com/2017/08/19/us-companies-spent-4t-buying-back-their-own-stock/

  23. MASTERMIND on Sat, 13th Jan 2018 1:18 pm 

    Rockman

    You used my links to disprove my argument? WOW…you really are losing it aren’t you! Relax pall I am sure there are plenty of articles you can source at your favorite fringe far right site “the daily caler”….

  24. GregT on Sat, 13th Jan 2018 1:49 pm 

    “You used my links to disprove my argument?”

    There’s been quite a bit of that going on here lately.

    Maybe if you actually took the time to read and comprehend ‘your’ links……….

  25. Kenz300 on Sat, 13th Jan 2018 1:54 pm 

    All new buildings and remodels need to be energy efficient and come with solar panes and battery storage.
    All garages need to come with 220 volt outlets for charging electric vehicles.
    In a few years electric vehicles will be the standard. Fossil fuels are the past.

  26. MASTERMIND on Sat, 13th Jan 2018 2:00 pm 

    Gregt

    IF you want to be a denier go right ahead.

    This is all i am trying to say..Right now the world is burning 10 barrels of oil for every one new we discover. And any society, business. or human. That burns through their assets at ten times their replacements. Will be bankrupt soon…

  27. MASTERMIND on Sat, 13th Jan 2018 2:01 pm 

    Greg

    Sorry forgot to source that last post! would hate to be like the deniers on this form..lol

    https://imgur.com/a/6dEDt

  28. GregT on Sat, 13th Jan 2018 4:01 pm 

    “And any society, business. or human. That burns through their assets at ten times their replacements. Will be bankrupt soon…”

    Thanks Captain Obvious.

  29. twocats on Sat, 13th Jan 2018 4:46 pm 

    Several Commodity indexes show early 2016 as the bottom of the 2014 plummet. Its been rising steadily ever since and just hit new multi-year highs. If (big If) the commodity complex lifts off then it seems pretty clear that will begin to put pressure on the global economy. disagreements with that general notion?

    the problem this time (as opposed to 2008) is that we have a global economy debt bubble that spans across every major CB, government, and household except the wealthiest people and corporations. (check out Doug Noland’s credit bubble bulletin). any disagreements with that general condition?

    I’m not saying all the above things will absolutely definitely happen, but if those series of events begin to happen then it will be very difficult to A) stop it, B) recover from it once it begins to unravel.

    The amount of leveraging in all these markets is just simply unimaginable to the human mind – I don’t think the human mind can really comprehend “billion” let alone “trillion” and all the ways movements of that kind of capital will behave when this global speculative hysteria has run its upward course.

  30. Davy on Sat, 13th Jan 2018 5:03 pm 

    While I agree Twocats, I would add we are in a new economic order where our perceptions and the actual conditions are in a disconnect. Normal rule of law, generally accepted accounting principals, and price discovery are now commingled with a global Ponzi arrangement. We know the world is more and more full of moral hazard but we still feel habituated to a normality of past decades. We are no longer there. That time is gone just like we are now a 1 degree warmer world but fail to understand it. This fits your A & B but with a C that is the unpredictability of a Ponzi arrangement. This arrangement is as much irrational as rational. This means predictability is wide open.

  31. Mad Kat on Sat, 13th Jan 2018 6:14 pm 

    “Oil Could Hit $80 a Barrel This Year”

    Good news for OPEC. Bad news for the US economy. Yep, 2018 is going to be more exciting than 2017 for sure.

    Threat of US government shutdown.
    US midterm elections.
    North Korea, Iran, Syria, Ukraine, Venezuela,etc.
    Flu outbreak and spreading in the US.
    Continuing US retail collapse.
    Trumpet’s tweets.
    More ecologic and weather disasters. (Earthquakes and volcanoes also?)

    And on and on. Pass the pretzels, please.

  32. Sissyfuss on Sat, 13th Jan 2018 6:41 pm 

    If the price hits $80 then something else will hit and the fan will be the target.

  33. twocats on Sat, 13th Jan 2018 10:23 pm 

    davy – so true. your summary of the new economic order is spot on which makes predictions very difficult

    maybe i’m stuck in the past but at some point, somewhere underneath all the financialization, real estate bubble, insurance ponzi bullshit I believe there are goods being delivered all across this country and the globe – and those goods are NOT delivered with options and swaps – they’re delivered with diesel. and if the price of that diesel goes up enough… well a lot of business models no longer hold up – airlines, fedex/ups, construction companies, grocery stores (razor thin margins to begin with). they can and will eat losses for a time – but they can’t suffer them forever – after a while they will need to pass them on. and if the economy still requires on some level that people go out and buy more than just the bare necessities (which is debatable – I don’t buy this “the american consumer is 70% of the economy” bull anymore) – then even companies like amazon and apple are going to feel a sting.

    if they had control of the ponzi then they will do the easiest thing – keep oil prices (WTI) below $80 and keep feeding easy money to shale to keep up production until we hit peak shale.

    if they don’t have total control and the commodity complex lifts off – well then I believe we are in for the next step down before 2020.

    one ironic aspect to this is that the markets used to have fear and would react negatively to negative events. this is increasingly not true. 2017 volatility was some of the lowest on record. market participants truly believe there is only direction – UP. and if this mentality takes hold in commodities we could easily have a melt up. there’s only one thing that does well in these markets – and that’s stuff that’s doing well. momentum is the goal. so if commodities gain momentum (with all “laws” of traditional economics have been eradicated) – they could easily take off. Forget oil $80 – We could be back to oil $145 by mid-year. I’m not saying its going to happen – just that the mechanics exist FOR IT TO HAPPEN. there’s simply too much money sloshing around and the algorithms are in control. hope they can still pull the plug if needed.

  34. Russell on Sun, 14th Jan 2018 4:11 am 

    The only thing that brings down high oil prices …Is high oil prices

  35. JH Wyoming on Sun, 14th Jan 2018 1:21 pm 

    “I wonder how the Trumpster will handle $100 oil..”

    Whatever it is he does, I’m sure it will be shocking, the language will be disgusting, it will help the super rich and hurt the lower income people and Paul Ryan will smile from ear to ear.

  36. MASTERMIND on Sun, 14th Jan 2018 1:54 pm 

    JH

    Imagine what trump will say if there is an oil shortage and massive price spike!

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