Tom Kirkman

Hey Oil Price Bulls - Let's Do The Time Warp Again

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On one of my old hard drives, I stumbled across a Word document of one of my old articles for Oilpro from 2015.  The Word doc is attached for download.  Thought this was lost when the old Oilpro forum shut down.

If you recall some of my earlier comments about my views on Oil prices, from 2015 to 2017 I had hoped for an average of $50 oil prices.  Ever wonder where I got that $50 number from?  It wasn't a random number.  The number for those 3 years was my best guesstimate for a Goldilocks oil price - not too high for the global economy, and not too low for oil producers.

(This year, I finally upped my guestimated Goldilocks price to $65, but this comment is about the past, not the present.)

Anyway, here you go, I wrote this 3 years ago; download the Word document if you want all of the embedded hyperlinked dox for prices.


Many 2016 Government Budgets Are Settling Around An Assumed Oil Price Of $50/bbl

As 2015 starts to wind down, many governments around the world have prepared their federal budgets for 2016. For oil producing countries, their assumed price of oil can be a significant factor in their annual budgets.

This post is a totally unscientific look at assorted oil producing countries' budgets which have factored in their assumed oil price for next year.

Some budgets are already submitted, some aren't ready yet, and many are not publicly disclosed  < cough >  < Saudi Arabia >  < cough > . So the list below is only collected from published information.

This compilation was simply for the purpose of getting a feel for what oil producing countries around the world are using for next year's budgets, through a filter of their assumed oil price. Also included in the list below are a few rating agencies (like S&P) and government agencies (like U.S. EIA).

At the low end, we have around US $40 per barrel, and at the high end, we have US $60+ per barrel. Brazil's Petrobras is an exception, and is assuming US $70. (Uh, Petrobras? What are you doing?)

But for the most part, the preponderance of publicly available assorted 2016 budgets (for oil producing countries) seem to be prepared based in the vicinity of an assumed $50 oil price. This shouldn't be too surprising, if you've been paying attention to oil prices lately.

While oil prices will fluctuate, 2016 budgets are one way of gauging how governments are putting their money where their mouth is; in essence, betting their countries' economies at least partly on oil price futures.

A few notable 2016 oil price assumptions by heavy hitters, which may (or may not) influence market sentiment:

•    Russia assumes $50, but may revise it to $48
•    IMF predicts $50
•    EIA predicts $59
•    World Bank revised its 2015 forecast to $52, down from $57. (It won't comment yet about 2016.)

Here's a list of assumed oil prices for next year's budgets and agency forecasts, from low end to high end. I'll periodically add to the list as more budgets (which are based on assumed oil prices) get published. Click on the links for reports where the oil price information was obtained from.
Below $50 per barrel

•    Trinidad and Tobago $40
•    Venezuela $40
•    Algiers $45
•    Angola $45
•    Iran $45
•    Iraq $45
•    Malaysia $48
•    Morgan Stanley $45 to $50
•    Texas budget agencies have differing assumptions, ranging from $44 to $64 (Really? Guys? Try to work together a bit...)
Around $50 per barrel

•    Ecuador $40 to $55 (Um, guys, what the heck?)
•    Mexico $50 / but hedging at $49
•    Azerbaijan $50
•    Belarus $50
•    IMF $50
•    Kurdistan $50 for Q4 2015
•    Russia $50 (but Russia's head of budget and taxes says $50 is overly optimistic)
•    Standard and Poor's $50 in 2016, and $60 in 2017
•    Norway $53
•    Qatar $55
•    Oklahoma $57
Around $60 per barrel

•    U.S. Energy Intelligence Agency predicts Brent at $59 and WTI at $54
•    Fitch Ratings $60 in 2016 and $70 in 2017
•    Jordan $60
•    Alaska $65
•    Colorado $68
•    Petrobras $70
On a related note, Gazprom, the world’s biggest natural gas exporter, is planning for the lowest price for its fuel in its main European market for more than a decade.

Gazprom's draft 2016 budget estimates gas prices of around $200 per 1,000 cubic meters ($5.45 a million British thermal units).

In 2015, its average price for exports to EU averaged around $238 per 1,000 cubic meters, and $349 in 2014.
So make what you will of the information above. In February, I already opined that oil is unlikely to hit $200 in the next decade. My opinion hasn't changed much. Except to add in that LNG price looks increasingly bearish, due to global overproduction over the remainder of this decade. But you are probably tired of my relentless comments on that topic...

Many 2016 Government Budgets Are Settling Around An Assumed Oil Price Of $50 bbl _ Tom Kirkman Oilpro article 2015.doc

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