Americas News
Analysts Revert Back to Bearish Forecasts As Tuesday Crude Prices Dip Slightly
Just one day after a rise in crude prices caused analysts to forecast a market recovery for the second half of this year, a 7 cent drop in Brent to $49.61 per barrel on Tuesday caused some them to reverse their opinions.
There was no settlement of West Texas Intermediate because of the impending Independence Day holidays in the U.S.
Stephen Schork, president of Schork Group Inc., said of futures edging up by just 1 cent in New York after advancing 11 percent in the previous eight sessions, "The bulls have had a nice little run but I would not be surprised if the bearish fundamentals take hold; we are beyond the peak refinery demand season for oil."
Just 24 hours prior, Schork told media, "Given that all these bearish headlines have been priced into the market, if you're going to have any sort of risk of a large outside move, I think it would be to the upside at this point."
It's worth noting that this too was a flip-flop of Schork's position last week, when he worried that oil had dropped $9 in a short period of time: "This has to be a concern for the bulls because oil demand has never been stronger....your concern now is, what happens in September?"
Wayne Gordon, executive director for commodities and FX at UBS Wealth Management, told Bloomberg television that the short term rally notwithstanding, "Longer term we think [the market] is structurally a little bit challenged," adding that a cutback in U.S. inventory over the next few month is "absolutely crucial for this market to go higher."
But if optimism is fleeting in the volatile world of oil markets, several analysts took little heed of Tuesday's slight losses and continued issuing predictions of a H2 2017 comeback.
Giovanni Staunovo, commodities analyst for UBS, said West Texas Intermediate could rise to $58 per barrel before the end of the year, and Brent could climb to $60: "My main view is based on [a forecast] that supply growth will lag behind demand growth in the third quarter and that we should see large inventory declines.
"Historically we have seen a negative correlation between inventory dynamics and price dynamics."
BMI Research took the middle ground in the debate: "We see a recovery for oil prices in H2 2017 from current levels, with OPEC production cuts, a slowdown in global supply growth and seasonally firming demand driving up prices," it stated, but went on to warn that "large-volume supply additions will keep price growth flat year-on-year in 2018."
A similar stance was taken by Fatih Birol, executive director of the International Energy Agency, who told Reuters on Tuesday, "In the current context we see the market rebalancing in the second half of the year; but if production increases in some of the key producers this may change the picture."
It seems that issuing caveats along with positive outlooks has become a trend in the analytical community, to wit: Callin Birch, an analyst at the Economist Intelligence Unit, who recently predicted that the Organization of the Petroleum Exporting Countries production cuts "should be enough to bring the market more into balance" but conceded that "this will only be enough to scratch the surface of ample global stocks."
