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Oil Update—October 2023

I am keeping with my prior forecast for West Texas Intermediate (WTI) oil price to range between $80 to $100 per barrel for November.

When I provided an update last month, the price of WTI was hovering in the low-to-mid-$90s per barrel. As indicated in last month’s update, some pundits were calling for $100 Brent, which is about four dollars greater than WTI prices, by Halloween because crude fundamentals were strong enough to withstand macro headwinds. Since that time, however, macro headwinds have reduced oil prices.

During the past week, WTI prices were hovering in the low-to-mid-$80s even though, paradoxically, some pundits argue that the recent Israel-Hamas war has added a war premium of three-to-seven dollars per barrel. Yet some argue that the war has taken risk out of the market.

Please see Amrita Sen’s interview on Bloomberg Market Surveillance on October 30, starting with the lead-in at about 2:20:35 of the video.

So it appears that crude fundaments are not immune from macro headwinds. That said, I expect the WTI price of $80 per barrel to hold. With shoulder season just ending, refineries will demand more oil in the next two-to-three weeks. And some believe that oil prices are still headed higher. In its October 24 article “Andurand Says Oil Must Hit $110 Before Saudi Arabia Eases Supply Curbs,” Bloomberg quoted a well-known oil trader:

Oil trader Pierre Andurand said he expects Saudi Arabia to keep its current supply curbs in place until prices reach at least $110 a barrel.

As inventories decline in the coming months, “the market will have to beg for more supply at some point,” the founder of Andurand Capital Management LLP said during a question-and-answer session at Saudi Arabia’s Future Investment Initiative in Riyadh.

“The Saudis will have to decide when and at what price to bring supply back,” he added. “For me, an adjustment likely will come around $110 a barrel. So there’s room to the upside for prices.”

Of course, if the Israel-Hamas war were to spread and intensify, then oil prices could easily exceed the top of my range. There are many active efforts, however, attempting to keep this dangerous situation from becoming even more dangerous.

I hope in November that equity and oil markets stabilize and that the end of the Israel-Hamas war is within sight.

To summarize: my WTI oil price forecast for November is $80 to $100 per barrel.

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