For May, I am increasing my April forecast by $5 per barrel for West Texas Intermediate (WTI) oil to range between $70 and $90 per barrel. On Friday, April 28, WTI was about $76.50 per barrel.
The last two months have been tumultuous. Two months ago was the start of another banking crisis, and one month ago, OPEC+ announced production cuts to start in May. Both of those events affected WTI’s price. After OPEC+ announced its cuts, oil rallied, though much of that rally has been lost since mid-April.
I lean bullish because many oil pundits expect a strong second half to 2023 and the driving season is rapidly approaching.
Paul Sankey, who is often seen on CNBC and who now runs his own research company, produced a YouTube video while visiting Calgary, Canada in mid-April. In his video, he also expressed a bullish outlook for oil.
The banking crisis has not completely resolved itself. In fact, according to the Financial Times article “JPMorgan, Citizens and PNC submit bids for First Republic” (subscription required), US regulators are racing to sell all or part of First Republic before the markets open on Monday, May 1.
At least three large banks have submitted bids to buy all or part of First Republic, the embattled California lender that US regulators have been racing to save this weekend.
Among those that have put in offers are JPMorgan Chase, PNC and Citizens, according to three sources with knowledge of the situation.
Along with the banking crisis, many continue to worry about the health of the global economy.
Because OPEC+ will start its cuts in May, its effects have not yet been felt in the physical markets.
On balance, I continue to lean bullish. While the banking crisis and general state of the global economy remain a concern, the global economy should remain strong enough to continue to demand more oil and the oil cuts will likely create a floor for prices, if not strengthen prices.