My expectation for April West Texas Intermediate (WTI) oil prices are slightly less than they were for January and February. I reduced the range endpoints by $2.50 per barrel to range between $65 to $75 per barrel. February WTI prices pierced my lower end of $67.50 during the markets squall in mid-March.
Last month, I mentioned lack of consumer confidence. Consumer confidence is likely to continue to be weak as the US administration announces new tariffs on April 2 and countries respond. Uncertainty around the globe is likely to increase, and consumers are likely to be cautious until they understand how the new environment affects them directly.
During the past two months, oil stocks have been surprisingly strong even though oil prices have been moderate. Barron’s Magazine noted the same observation in a recent article from March 27 “An Oil Stock Riding the ‘Dune Express’ to Success in an Uncertain Energy Rally” (subscription required).
The energy sector shouldn’t be doing this well. It’s the best-performing sector in the S&P 500 this year, despite crude prices sliding a bit. The return of President Trump to the White House has boosted hopes that the federal government will continue to push for increased U.S. oil production and less on renewable sources of power, something that could lead to a glut of unused oil—and lower prices still. Perhaps the markets are sniffing out something the headlines aren’t—or maybe the energy sector is just getting ahead of itself.
My guess—and it is only a guess—is that investors have become more cautious on the high-flying magnificent seven stocks and have allocated some of their capital to solid stocks with higher paying dividends and with reasonable price-to-earnings multiples. Unfortunately, there is no way to know with any confidence.
Once again, I present Eric Nuttall’s commentary. I agree with most of what he says with the exception that I am not quite as bullish as he is on oil prices, at least not in the next month.
Sanctions against Iran have largely been ineffective in the past, and I expect that they will be ineffective going forward. As mentioned, tariffs are likely to introduce more caution and uncertainty around the globe. For the next month, I expect oil prices to remain soft.
The lower end of my price target at $65 is if the markets come under significant duress. And $75 is if the new tariffs are largely irrelevant, and everyone is happy again.
In his comments, Nuttall mentioned the Dallas Fed. It is interesting to note that the average expectation for oil prices six months from now is $68 and one year from now is $70.
Another page worth reviewing is the Comments tab. Here are three comments from that page:
- The administration’s tariffs immediately increased the cost of our casing and tubing by 25 percent even though inventory costs our pipe brokers less. U.S. tubular manufacturers immediately raised their prices to reflect the anticipated tariffs on steel. The threat of $50 oil prices by the administration has caused our firm to reduce its 2025 and 2026 capital expenditures. “Drill, baby, drill” does not work with $50 per barrel oil. Rigs will get dropped, employment in the oil industry will decrease, and U.S. oil production will decline as it did during COVID-19.
- I have never felt more uncertainty about our business in my entire 40-plus-year career.
- Uncertainty around everything has sharply risen during the past quarter. Planning for new development is extremely difficult right now due to the uncertainty around steel-based products. Oil prices feel incredibly unstable, and it’s hard to gauge whether prices will be in the $50s per barrel or $70s per barrel. Combined, our ability to plan operations for any meaningful amount of time in the future has been severely diminished.
Like I said, uncertainty is on the rise until there is more clarity regarding tariffs.
In summary, my expectation for WTI oil prices for April is $65 to $75 per barrel.