As outlined in Global Commodities Focus: Reflation, Risks and the Rocky Road to Recovery, while Citi’s Commodities Team continues to forecast an oil price recovery over coming years, is has reduced its Brent oil forecast by US$3/bbl in CY17 & CY18, to US$57/bbl and US$61/bbl respectively. More meaningfully for our coverage, we have revised down our LT oil price forecast from US$70/bbl (real 4Q16) to US$65/bbl (real 1Q17), premised on revisions to Global Oil Vision: Revival of the Fittest assumptions (see Big Oil is Still Revival of the Fittest: ENI, STL and COP key picks. Upgrade GALP.). Extracts from notes below:
Looking into 2017: Oil is expected to outperform the rest of the complex. The market is already close to balancing and an OPEC cut accelerates this. The level of supply disruptions is low by recent historical norms and this can easily reverse given the vibrant geopolitical backdrop. And Trump remains a huge wildcard for the oil markets, with potentially bearish implications for global trade and hence EM growth and energy demand, and bullish implications for geopolitics given the prospects of much greater US isolationism.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
