I am lowering my price forecast for West Texas Intermediate oil to range between $35 and $45, a decrease of $2.50 per barrel from last month.
Just as I released my forecast last month, the bottom dropped out. Oil prices plunged into the high $30s. Rising COVID-19 cases, cheating by UAE and Iran, strengthening US dollar, British Petroleum’s bearish forecast, major traders growing more cautious, Libya resuming production, and a few other factors all contributed to oil weakness. The coronavirus situation, however, continues to weaken demand and hamper oil’s price recovery. That said, oil will continue to recover as the supply glut is exhausted and demand increases.
Even though I have reduced my forecast, I expect WTI to hover close to $40 throughout the next month. I do not think it will go much below $40 because of the Saudi threat to hurt those who short oil. Similarly, because of the rising number of coronavirus cases throughout the world, oil prices will have difficulty rising too much.
I am hoping that I will raise my range again soon.