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Bank analysts chase headlines

Published Wednesday, January 13th, 2016

Bank analysts are in a race to the bottom. Goldman led the way with $20 bbl late last year. Morgan Stanley joined the ”oil in the 20s” chorus earlier this week. RBS beat that with $16 and yesterday Standard Chartered came up with $10 bbl. It is deeply worrying for bears when so many are converted late in the game. To quote from The Devil’s Financial Dictionary a forecast “is an aftercast, based not on what is likely to happen but rather what has been happening. If markets have been doing well lately, then the outlook will be positive; if they’ve been doing poorly, then the outlook will be negative.”

Crude traded lower yesterday down to $30.34 bbl on Brent whilst WTI broke below $30 bbl hitting $29.93 bbl. Prices then rebounded on talk of an OPEC emergency meeting which was quickly ridiculed by the UAE whose Energy Minister said more time is needed to rebalance the market. He is right and Saudi and allies will be satisfied to hear that BP are cutting 4000 more upstream jobs and that Petrobras is cutting its 5-year investment programme by 25%, a cut of $32 billion. At the close Brent was down 69cts/bbl at $30.86 bbl and WTI down 97cts/bbl at $30.44 bbl.

As analysts queued up to cut their price forecasts the EIA released the first of the triplicate of regular monthly oil reports, with the IEA and OPEC presenting next week. The EIA has made some major amendments to its non-OPEC supply estimates cutting last year’s growth by 700,000 bpd to only 490,000 bpd. For this year it now sees a non-OPEC supply contraction of 640,000 bpd. The net result is an increase in the 2016 OPEC call of 700,000 bpd to 31.43 mbpd with a first estimate for 2017 of 32.64 mbpd.

to read the rest of the report, please click here

Posted by David Hufton