Technical & Fundamental Oil Reports Specialists

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Banks turn very bearish on oil

Published Tuesday, August 11th, 2015

Oil prices have very few supporters at the moment. The last week has seen a cascade of downward revisions in forecasts from Moodys, Goldman Sachs and Societe Generale. The common theme is that prices will be lower and for longer than expected. These revisions are important as they impact on credit ratings and the cost and ability to raising finance.

JP Morgan have been particularly aggressive in their revisions. In the space of a month they have lopped $8 bbl off their Brent and WTI forecasts for this year and taken an enormous $19 bbl off their numbers for 2016. They now forecast Brent at $54.50 bbl for this year and $52.50 bbl for next and WTI at $48.50 bbl and $46.50 bbl. They are unique in putting 2016 below 2015. For those who believe that when the banks get very bullish or bearish it is a strong signal to go the other way then this is a gold plated buy indicator.

Oil prices did not fall yesterday. Perhaps the JP Morgan factor came into play but more likely it was news that a major distillation unit at BP’s Whiting refinery in Indiana was down pushing product prices higher, taking crude with them. It is not good news for crude offtake so WTI lagged gaining only $1.09 (44.96) compared to +$1.80 on Brent (50.41). The Whiting problem pushed Sept/Oct WTI to -70cts/bbl (-21) and led Canadian grades down towards $25/bbl fob Hardisty. Gasoline gained 7.1cts/gal and Heating oil 4.85cts/gal.

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Posted by David Hufton