My December West Texas Intermediate oil price forecast remains unchanged from November: December WTI prices should range between $55 and $65 per barrel. Last month, I commented that I expected WTI oil prices to remain in the high $50s or low $60s. For the most part, I was correct. I expect the same for December.
There have not been any dramatic changes during the past month. Of course, in late November, the US administration began intensive talks with Ukraine and Russia in hopes of bringing an end to the war. My expectation is that talks will last past the New Year. Be warned, though, that no one, not even the participants themselves know how future discussions will unfold. Because the exchanges among the three parties—the US, Russia, and Ukraine—so far have shown little common ground, it will likely take a prolonged period to reach resolution, especially with the holiday season coming up.
And the US has taken aggressive action toward forcing out President Maduro from Venezuela. It has deployed a massive naval task force, including the aircraft carrier USS Gerald R. Ford, about a dozen navy ships, several thousand sailors and Marines, F-35 stealth jets, and more. The US has also closed Venezuela’s airspace, though unconfirmed by the FAA or ICAO, and has increased concerns of aerial enforcement. Aside from threatened brute force, the US has also employed diplomatic and economic measures against Venezuela. Because of the massive effort that has been expended so far, the US is almost certainly going to do something soon. If it were to simply walk away, that may send a dangerous signal to its adversaries. While I hope Maduro steps aside, I have no idea how this situation will play out.
The price effects from geopolitical developments are nearly impossible to assess in advance because there are simply too many unknowns. Looking back after the fact, the outcome may have seemed obvious. Going forward, however, it is nearly impossible.
I always enjoy viewing Paul Sankey’s YouTubes. Here is his latest:
Similarly, I enjoy Eric Nuttall’s YouTubes, and here is his latest:
As we approach the end of the year, I am curious to see if the pundits change their outlook for next year. We have been hearing a lot about oil on water and endless oversupply, yet oil prices have remained stable. If prices remain stable into year end, will that development cause others to reevaluate their outlooks?
While I expect oil prices to range between $55 and $65 per barrel, geopolitical events, good or bad, may sway oil prices from my range. As mentioned earlier, geopolitical events are impossible to assess in advance.
I wish everyone a Happy, Healthy, and Prosperous Holiday Season!