Crude Oil Forecast

[InTruth]

Saudis don’t want the price of oil to go too high otherwise it brings in more production by other countries. Demand is expected to increase 1.3 million barrels a day. New supply is expected to be 1.7 million barrels/day. Even if the demand increases OPEC is ready to supply all that demand easily. I believe EVs will cap new demand per year at 1.3 million barrels. At the margin is what counts. So 2018 will be quite an oversupply of oil. OPEC will cheat, they are already cheating. Increased prices will also put a drag on growth. End users have felt the increase from $26 to $66. Developing nations, where most of the new demand is coming from, will really feel the effects of this increase in price. Subsidies were removed when oil dropped. Now that the price is high without fuel subsidies, emerging markets can really feel the pain. This undermines the growth everyone is talking about. The demand from China continues to accelerate but the top 10 gas guzzlers have been banned by China and more is to follow. China's population is now aging. However Chinese oil production is still increasing for a few more years to offset some of this increased demand. Demand replacements are a lot: natural gas, solar, wind, nuclear, etc. Natural gas relative to oil is really cheap so everyone will switch over to NG, again, which caps demand for oil. Demand for oil will be lucky to achieve growth of 1.3 million barrels a day. IEA supplies a chart showing there is an oversupply problem again at the end of the 1st quarter of 2018. No wonder why OPEC took such drastic measures. There’s a big oversupply in NG; lots of large LNG plants around the world. True gas-fueled cars are few, and car fuels account for the biggest portion of oil demand; but higher prices are higher prices. Too high, and people start using public transport if it’s available. All this talk of global growth could be ending soon, or was never really there, which also caps oil especially in the next recession which is not far away. We are very late cycle in the longest bull market in human history. In fact, according to some, such as Forbes’ Michael Lynch, a recession is pretty close by. Lynch uses an indicator he calls “more money than brains” to anticipate recessions. Describing it as “conspicuously ridiculous consumption”, he exemplifies it with the current fad of raw water. He also notes that the U.S. stock market is at historic highs. It is time for a correction, Lynch says, and he is not the only one. With a correction in stock markets and a slowdown in the economy of the world’s largest consumer, what are the chances of Brent hitting $100 a barrel? Slim. It seems commodities will remain low leading up to the next recession. This happens sometimes which presents itself as a multi-year bottom in commodities before the next wave starts again. I am sure of this.

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=CRB&insttype=&freq=2&show=&time=20