Daniel Yergin writes in the WSJ (http://www.wsj.com/articles/where-oil-prices-go-from-here-1463345204):
“Continuity is clear in Saudi Arabia’s deployment of this new market-forces policy that first emerged at the 2014 OPEC meeting. Prince Mohammed reaffirmed it in April. The oil business, he said, “is a free market that is governed by supply and demand and this is how we deal with the market.” The day after his appointment, Mr. Falih stated that Saudi Arabia could well expand output “to its maximum sustainable capacity,” from the current 10.2 million barrels a day to more than 12 million, a number that could go higher with new investment.”
And this:
“Moreover, Saudi Arabia doesn’t intend to give up one barrel of market share to an Iran that is ramping up its own exports now that economic sanctions have been lifted after the nuclear deal. The heightened tension between the two countries is a central factor in today’s oil market.”
But Goldman is short covering, from Reuters (http://www.reuters.com/article/us-research-crude-goldman-idUSKCN0Y70QO):
“U.S. bank Goldman Sachs, one of the most bearish forecasters on oil over the past year, on Monday raised its short-term price outlook as it said the market had flipped into a deficit due to production outages in Nigeria and Canada.”
And let’s not forget what the EIA wrote last week on what options tell us about future price ranges:
“Brent crude oil prices are forecast to average $41/b in 2016 and $51/b in 2017, $6/b and $10/b higher than forecast in last month’s STEO, respectively. West Texas Intermediate (WTI) crude oil prices are forecast to average slightly less than Brent in 2016 and to be the same as Brent in 2017. However, the current values of futures and options contracts suggest high uncertainty in the price outlook. For example, EIA’s forecast for the average WTI price in August 2016 of $42/b should be considered in the context of Nymex contract values for August 2016 delivery. These contracts traded during the five-day period ending May 5 (Market Prices and Uncertainty Report) suggest the market expects WTI prices to range from $32/b to $65/b (at the 95% confidence interval) in August 2016. ”
Yeah, forecasting the price of oil is difficult, which is why it is done often…
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