Oil Update - November 2017

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Includes: BNO, DBO, DNO, DTO, DWT, OIL, OILK, OILX, OLEM, OLO, SCO, SZO, UCO, USL, USO, USOI, UWT, WTID, WTIU
by: Kevin Stecyk

With WTI prices at about $58.00 per barrel, I am updating my WTI oil price forecast upward over the next several weeks to range between $50.00 and $60.00 per barrel. As mentioned last month, geopolitical uncertainties are likely to have created a floor near $50 per barrel. Aside from the conflict between the Kurds and Iraqis, North Korea's nuclear ambitions, and the potential for President Trump to decertify the Iran nuclear deal, the arrests in Saudi Arabia have added to the list of geopolitical uncertainties.

In its latest monthly report, the International Energy Agency lowered its global crude demand growth outlook by 100,000 barrels per day for 2017 and 2018. The reduction in demand growth was in direct opposition to the OPEC report that raised demand growth. If the IEA is correct in its forecast, current prices might not be sustainable.

On Nov. 30, OPEC and Russia are scheduled to announce their decision whether they will extend their oil production cuts past March of 2018. Most, including me, expect that the cuts will be extended to the end of the year. Even if the cuts are extended, the bulls might declare victory and reduce their long positions. On the other hand, prices might rise even further with decreased uncertainty.

Because of the extended rally in oil prices and because of IEA's reduced growth demand, I am cautious about oil prices escalating much further in the near future. I do appreciate, however, that global oil inventories are falling, and that might cause prices to spike higher. We should gain more insight after the market's reaction to OPEC's decision.