UBS Lowers Oil Price Forecasts
September 9th, 2019
Baker Hughes US Rig Count report said that 4 rigs drilling for crude oil were cut last week putting the total number of rigs looking for oil at 738 compared to 860 last year at this time. In Canada the number of crude oil rigs were cut by 3 to a total of 102 compared with 133 a year ago. Oil producers and their supplies are cutting their budgets, staff and production goals amid a growing consensus of forecast that oil and gas price will remain slow for several year. So far this year there have been 26 oil and gas companies with debts totaling $10.96 billion that have filed for restructuring plans. That nearly matches the 28 companies that filled bankruptcy in all of 2018.
UBS lowered its six- and 12-month oil price forecast. It sees Brent crude at $55 per barrel and WTI at $50 per barrel in six months and in 12 months, down from a previous estimate of $63 per barrel and $58 per barrel, respectively. It 12-month oil price forecast was down from a previous estimate of $60 per barrel for Brent and $55 per barrel for WTI. A UBS analyst said global oil demand could increase by 900,000 bpd in 2019 and 2020.
Saudi Arabia’s new oil minister, Price Abdulaziz bn Salman, said that the pillars of the Saudi oil policy would not change. He said the deal to cut 1.2 million barrels per day from production would continue, as well as, the alliance with OPEC and other producers, including Russia, which is the key other party. This is King Salman’s son and helps to consolidate his power. Price Salman is known as production cutter and that along with the fac that there is a new person in charge adds to the risk and is supportive to crude price currently.
Crude oil and the rest of the energy market is trying to work high on the above news and the news that China’s crude imports were up 3% in August from July. China’s imports are up 10% in the first 8 months of this year compared to the same months last year. This news is seen as supportive as questions about global energy demand continue to be an issue for the market.
From John Kemp of Reuters in his weekly update on Hedge Fund activity in the oil sector. He writes: “Hedge funds are becoming more pessimistic about the outlook for oil prices as trade tension between the United State and China remain unresolved and global economic growth grinds to a halt. Hedge fund and other money managers were net sellers of petroleum futures and option last week for the fifth time in seven weeks, according to an analysis of data published by regulators and exchanges.”