The Citi oil uber-bull is no more:
As outlined in Commodities 3Q’17 Market Outlook: Searching for Summer Sunshine, while still constructive on oil, the unanticipated drop in disrupted oil supply (Libya and Nigeria) in parallel to a more productive Permian has led Citi’s Commodities Team to revise down its expected price path for oil through year-end. We are revising our base case oil price forecast down by ~$5/bbl for 2017 and 2018 whilst revising up our 2019 oil price forecast by ~$5/bbl. Extracts below:
OPEC/Non-OPEC Group Created its Own Big Problem. If the group doesn’t maintain its existing production deal then the impending threat of an incremental 1.5-m b/d of oil on the market (and maybe more) would send oil prices lower. This is something that no member of the group can afford and hence they have effectively backed themselves into a corner and are likely to remain committed to the current deal in spite of a tense geopolitical backdrop between member states Iran, Qatar and the GCC. Increasing the pain is the wave of US producer hedging that was completed in Dec-16 that has locked-in 2H’17 shale barrels even as oil prices moved lower.
