All Of The Top Energy Forecasters Are Saying Oil Prices Will Fall For The Rest Of The Year
This, after the price of benchmark West Texas Intermediate (WTI) surged 16% to $108 between mid-June and mid-July.
The August futures contract now stands at about $105.
Here's the rundown of 2h2013 price calls:
- On Tuesday, the EIA forecasted WTI's oil price spread against London's Brent oil price would widen to $6 for the rest of the year, while predicting Brent itself would fall to an average of $104 from its current level of $108. Thus, the EIA expects WTI to average $98 for the rest of the year.
- UBS' Julius Walker says in a note that WTI will decline to $99 in Q3 and $91 in Q4.
- Goldman Sachs' Damien Courvalin has $99 for Q3 and $97 in Q4.
- And on Monday, Morgan Stanley's Adam Longson confirmed targets of $99 for Q3 and $94.50 for Q4
This comes on the heels of a Deutsche Bank note from a team led by Rocky Fishman that U.S. crude was heading toward a "major pullback" near term.
So what's driving these bearish calls? Basically, there's still lots of supply. Here's Walker:
We think some of the reasons for WTI’s strength will be short-lived and the spread to Brent will widen again. Canadian crude output problems are largely resolved; fears about a significant slowdown in US production appear unfounded; the Whiting coker start-up will leave more sweet crude available, even while US refineries start to lower runs. In other words, the Cushing glut is not yet resolved.
The EIA pretty much says the same thing:
EIA expects the WTI discount to begin widening again, to $6 per barrel by the end of 2013, as crude oil production in Alberta, Canada, recovers following heavy June flooding, and midcontinent crude oil production growth outpaces increases in capacity to transport crude oil from the region to refining centers on the Gulf and East Coasts.
One trader we spoke with remains unconvinced, saying inventories in Cushing, Oklahoma are relatively low, and that lots of have missed the top.
We'll know more about Cushing inventories today when the EIA releases its latest petroleum report.
For now, it looks like there's a consensus.