Oil Prices Bookended for Rest of This Year? Maybe $50 to $80? (My old 'See Saw' theory redux)

[Tom Kirkman + 8,860]

Last week Wednesday (it was a holiday here) I had a nice long lunch conversation with a newspaper editor about Malaysia and international oil & gas.  I discussed my See Saw theory and Suitable Balance theory, and using my oft repeated figure of $65 as a suitable balance as the center, for this year, I saw $80 as the high side, $65 as the center, and $50 as the low side.  Oil prices seemed to me to be pretty much bookended between $50 and $80 for this year.

Yeah, I know, this $50 to $80 range is a fairly large spread, and not in the least controversial.  Just pointing out how I arrived at that range.

To recap some of my previous comments here this year, my hoped for "suitable balance" of $65 this year is not too high to hurt global economies, and not too low to hurt oil producers.

So $65 is my "center point" on the oil price See Saw.

If oil prices swing too far either too high or too low, bad things happen.  If oil prices can stay near a "suitable balance" then the crazy price roller coasters can be subdued.

Supply & Demand See Saw are similar concept, but that is a different discussion...

This year, whenever oil prices seem to head toward breaking $80, the prices get pulled back down.

So $80 seems to be the high side.  Which is $15 higher than my See Saw balance "center point" of $65.

So my logic is that the opposite low side of the price See Saw would be a corresponding $15 lower than my proposed center point of $65, which would be a low side of $50.

Or my concept of a suitable balance might just be wishful thinking on my part.

Anyway, was amused when I read this article by Nick Cunningham today:

Rising Supply Will Keep Oil Prices Rangebound

 

/ edit: I forgot to include my usual dislaimer:

Just my opinion; as always, you are free to disagree.

[Keven Tan + 85]

Hi Tom, Good thoughts! Thanks for sharing.

Any Prediction by the end of the year?

[Tom Kirkman + 8,860]

17 minutes ago, Keven Tan said:

Hi Tom, Good thoughts! Thanks for sharing.

Any Prediction by the end of the year?

Thanks Keven.

Nope, no predictions.  I'm not really a predicter of prices, mostly offering my opinions and what I hope prices will be.

[Mehran Barani shikhrobat 0]

Hi Tom

 

Thanks for sharing your thoughts. I was thinking you might not consider the reality of the strategic world plans. For instance, the impacts of Trump's trade war against China and the EU is totally unexpected. However, this seems to be far higher than we forecasting. The real price, in my opinion, goes far to over $120 by the end of this year. 

[Tom Kirkman + 8,860]

9 hours ago, Mehran Barani shikhrobat said:

Hi Tom

 

Thanks for sharing your thoughts. I was thinking you might not consider the reality of the strategic world plans. For instance, the impacts of Trump's trade war against China and the EU is totally unexpected. However, this seems to be far higher than we forecasting. The real price, in my opinion, goes far to over $120 by the end of this year. 

My comment this morning.  I tend to think a huge price spike might be overblown by media.

 

[Dan Warnick + 6,100]

A major impact of the trade war is lessening demand.  Higher oil prices also lessens demand.  How do you figure prices go up when less oil is being ordered/delivered?

[Jo Mack + 43]

Just say in- no one, but no one can predict oil prices.

[Bhimsen Pachawry + 72]

Oil prices are political in nature and not just demand and supply

[Dennis Coyne + 82]

Tom,

When you say "oil price", do you mean WTI?

For the World Oil price, the EIA believes Brent is the best proxy.

From Jan 2016 to August 2018 the 5 week centered average for Brent spot price has risen at an annual rate of $14.5/b

[Dennis Coyne + 82]

One might argue that this will not continue and oil price will decrease or rise no further.

In the 2009 to 2012 period the Brent oil price rose at the annual rate of $24/b from 2009 to 2012 and then averaged $110/b from Jan 2011 to August 2014 (3.6 years).  So such a rise in the price of oil has continued beyond $80/b in the past and may again in the future.

[Tom Kirkman + 8,860]

45 minutes ago, Dennis Coyne said:

Tom,

When you say "oil price", do you mean WTI?

No, I mean Brent. 

WTI is its own herd of wild cats.

[Tom Kirkman + 8,860]

Update.  My comment yesterday on LinkedIn:

https://www.linkedin.com/feed/update/urn:li:activity:6503089068564410369

My longer term views on oil prices can be at odds with traders and MSM.

At the beginning of 2018 my call was for $65 oil [Brent] average for 2018.  Actual average for 2018 turned out to be around $70.

This year WTI looks likely to center around $50 and Brent looks likely to center around $70, with fluctuations up and down around those centerpoints.

Please note that I did not choose those centerpoints of $50 WTI and $70 Brent.  Those are simply the numbers which I have observed that WTI and Brent tend to gravitate towards - nothing to do with me.

==================================================================

Today's lead article on the Oil Price main news site:

Bank Of America: Oil ‘Anchored’ Until 2024

Brent oil prices should trade between a relatively narrow range of $50 to $70 per barrel through 2024, with prices “anchored” around $60, according to a new report from Bank of America Merrill Lynch.

This dovetails with the current futures prices five years out, centered around $60 per barrel. Prices will bounce around, but should remain within that $20-per-barrel range.

 

@TomTom