After a turbulent April, my expectations for West Texas Intermediate (WTI) oil prices in May are $5 less per barrel April. I expect WTI to range between $60 to $70 per barrel.
As we are all aware, April was a challenging month. Most investors expected OPEC+ to hold steady on production increases. Instead, it brought three months of production increases forward. And the US administration surprised investors with a harsher than expected set of tariff demands, especially against China. Many in the investment and business communities have commented that, although the tariffs themselves are detrimental to the business climate, the volatility and uncertainty is even worse. Because the business pages of major online newspapers have been filled with analysis and commentary about the tariffs and what they may mean for the US and global economies, I do not intend to belabor the issue here.
That said, Wall Street banks have cut their S&P 500 year-end targets. On April 18, when the S&P finished at 5,283, the Financial Times published “Wall Street slashes stock market forecasts amid Trump tariff fears” (subscription required) with the following chart:
These lower targets reflect anticipated diminished economic activity and profits. With less economic activity and potentially more oil output from OPEC+, oil prices are also expected to be lower.
In early May, I expect OPEC+ to once again increase production. In the strictest sense, it is not OPEC+ but rather the “voluntary eight” countries that had earlier reduced their production to now increase their production from current levels.
Some are attributing this increased production as punishment to those countries who have not honored their commitments to reduce production. I prefer Dr. Anas Alhajji’s explanation that the increased production level more easily allows the overproducers to meet their targets. If punishment or retribution were the goal, OPEC+ would take more drastic actions, as it has done in the past.
In the past few monthly updates, I have provided links to Eric Nuttall’s videos. He is more cautious on oil prices going into OPEC+’s decision. Here is his five-minute YouTube video:
Oil is always volatile. And it is especially volatile with so much uncertainty surrounding tariffs and other geopolitical issues.
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