The summary of market info as of 13 Jan 2015 is as follows:
- The markets are continuing to price in huge oversupply in the first half of 2015. Prices are poised to drop further, testing the ability of U.S. shale drillers to keep pumping.
- U.S. oil producers are bailing out of long- term contracts for drilling rigs as crude prices sink below $50, another signal that the nation’s shale boom is slowing. While U.S. drilling activity has slowed down in response to the price plunge, it will take months for that to translate into lower supplies.
- The UAE will stick with a plan to increase oil-production capacity to 3.5 million barrels a day in 2017 even as an oversupply pushed prices to the lowest in more than five years.
- EIA forecasts that Brent crude oil prices will average $58/bbl in 2015 and $75/bbl in 2016, while WTI will average $55/bbl in 2015 and $71/bbl in 2016.
Using the methodology of Error Correction Mechanism (ECM) developed by Engle-Grager (2003 Economics Nobel Award) , we update the SLC (Sumateran Light Crude/Minas) forecast is as follows:
Based on the graph, we estimate SLC will continue down to $46.5/bbl in Jan 2015 and will average $ 56.6/bbl for full year 2015.
Disclaimer: The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and would be updated every month.