My forecast for March is that the West Texas Intermediate oil price will range between $55 and $65 per barrel. The range is five dollars higher than last month’s forecast.
I have raised my target range because of the ongoing problems in Venezuela, the progress that US and China are making toward some sort of a deal, and OPEC+’s determination to reduce oil exports. An excerpt from the February 12 Financial Times article “Saudi Arabia goes on the hunt for global oil and gas” states the following:
The kingdom and Russia are leading global producers to curb supply to support oil prices after they fell by 40 per cent in late 2018. Crude is now hovering near $60 a barrel, while Saudi Arabia’s budget requires levels closer to $80.
Mr Falih said in March the kingdom would reduce production to near 9.8m barrels a day, from above 11m b/d in November. Exports would also fall to near 6.9m b/d, down from 8.2m b/d three months ago.
Brent crude, the international benchmark, rose $1.82 a barrel to $63.34 after the FT reported the minister’s production outlook, though prices came off their highs later in the trading day.
As we constantly see in the news, Venezuela is going through a very difficult time. Putting oil aside for a moment, I hope that a new government can quickly stabilize and then improve the situation. So far, the US and China appear to be making progress. And the rising oil prices throughout February and OPEC+’s determination to reduce output should lead to higher prices.
Of course, the questions then become how far and how fast? Before making a new assessment, I want to see how the market reacts to these changes over the next month.
Global growth, US shale production response, and Iranian sanctions are also factors that will play important roles in the months ahead.